What is Over-the-Counter (OTC) Market?
Over-the-Counter (OTC) Market is a decentralized marketplace where financial instruments: securities, derivatives, crypto: are traded directly between two parties without going through a centralized exchange. The term originated when securities were literally traded “over the counter” at brokerage desks.
OTC vs Exchange Trading
- Exchange: Standardized contracts, central clearing, transparent order book, exchange-set price discovery (NYSE, NASDAQ, Borsa İstanbul)
- OTC: Bilateral negotiation, custom terms, dealer-driven pricing, no central counterparty (typically)
Major OTC markets
- OTC Equities (Pink Sheets, OTCQX, OTCQB): Stocks not listed on major exchanges
- OTC Derivatives: Swaps, forwards, exotic options: bilateral contracts
- OTC Bonds: Most bond trading is OTC; dealer-to-dealer or dealer-to-client
- OTC Forex: The world’s largest market: about $9.6T average daily turnover in April 2025 (BIS Triennial Survey)
- OTC Crypto Desks: Large block crypto trades for institutions (Genesis, Cumberland, B2C2)
Why OTC exists
- Customization: Bespoke terms (size, expiry, settlement) not offered on exchanges
- Privacy: Trade size/identity hidden from public market
- Reduced market impact: Large orders don’t move public market prices
- Counterparty selection: Trade only with vetted partners
- Off-exchange listing: Smaller companies access secondary market without exchange listing
Post-2008 OTC reform
The 2008 financial crisis exposed OTC derivative risks (Lehman, AIG). Reforms (Dodd-Frank in US, EMIR in EU; in Türkiye, trade reporting to the Central Registry Agency (MKK) and central counterparty services by Takasbank under the capital markets framework):
- Standardized OTC derivatives must clear through Central Counterparties (CCPs)
- Trade reporting to swap data repositories
- Initial + variation margin requirements for uncleared swaps
- Designated trading platforms for liquid derivatives
OTC Crypto Desks
Institutional crypto buyers/sellers use OTC desks for blocks > $100k to avoid slippage on public exchanges. Process: bilateral RFQ, escrow, settlement. Major desks: Coinbase Prime, Kraken OTC, Genesis (defunct after FTX collapse), Cumberland, B2C2, Wintermute.
Turkish OTC framework
In Türkiye, OTC transactions in capital market instruments fall within the remit of the Capital Markets Board (SPK), and some off-exchange trades are reported to or registered with Borsa İstanbul. Repo and reverse repo, FX swap and money-market transactions run mainly under TCMB and BDDK rules. The 2024 Crypto-Asset Service Provider (CASP) regime under Law No. 7518 also reaches crypto OTC activity offered to customers in Türkiye.
Practical implications
For startups raising large block secondary sales (e.g., founder partial exit at Series B+), OTC desks (Forge, EquityZen) facilitate liquidity without public listing. For crypto-native businesses moving large amounts: OTC desks reduce execution risk vs splitting orders across exchanges. Vircon Legal advises on OTC trade documentation + Turkish regulatory compliance.
Sources. Capital Markets Board of Türkiye (SPK) and Banking Regulation and Supervision Agency (BDDK).