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Investment
Over-the-Counter
Trading financial instruments directly between two parties without using a formal exchange.
OTC trading offers more flexibility and privacy but usually has less transparency and higher counterparty risk. Most retail investors trade on exchanges, while large institutions often use OTC markets.
It's like buying something from a friend instead of going to the big official shop.
Real world: Many forex trades, corporate bonds, and some derivatives happen over-the-counter. The two parties agree on price and terms privately rather than through a public exchange.
💡 Over-the-counter trading is more flexible but less protected than exchange trading.