OTC has a particular significance in relation to IG's platform. Here, we define OTC in general investing and explain what it means to you when trading with IG.
OTC stands for over-the-counter, and refers to a trade that is not made on a formal exchange. It is often also referred to as off-exchange trading.
Usually, the firms offering OTC trades will quote the prices at which they are willing to buy or sell assets, giving one price for each trade. This differs from on-exchange trades, where many buy and sell prices can be seen from a variety of different sources.
The most popular OTC market in trading is forex, where currencies are exchanged between parties directly instead of on exchanges. This means that forex trading is decentralised, and can take place 24 hours a day – instead being limited to an exchange’s opening hours.
Shares are often traded OTC as well as on exchanges. Some businesses, for example, sell their shares away from recognised exchanges. There are also networks and market makers that allow the trading of shares away from exchanges. These include multilateral trading facilities, dark pools and lit pools.
Derivatives and bonds are also commonly traded over-the-counter, although different instruments will be traded in different ways.
IG offers both OTC and on-exchange (via our DMA service) trading on forex and shares, allowing you to choose whether you trade at our price or view all available options on order books. When stockbroking with IG, we use smart order routing technology to search for additional liquidity across various ‘dark pools’ and ‘lit’ venues and source the best possible prices.