Forex glossary
OTC market (over-the-counter)
An OTC market covers off-exchange transactions agreed bilaterally or through platforms outside an exchange order book. It implies neither exemption from regulation nor a universal absence of central clearing. A retail CFD's agreement and provider model establish counterparties, pricing and counterparty risk.
Illustrative example
How does it work in practice?
In a hypothetical bilateral agreement, a company and its bank exchange 1,000 EUR for 4,300 PLN outside an exchange order book. This is an OTC transaction; trading off-exchange does not remove applicable legal obligations.
A case to work through
A platform with a chart and book
Model: an app shows charts and prices, but the agreement specifies a bilateral off-exchange CFD with the provider.
- Interface elements do not change contractual parties.
- Bilateral structure describes the trade; legal requirements need separate assessment.
What follows? Identify counterparty, product and execution venue.
Example boundary: OTC does not determine every clearing or asset-protection rule.
A useful distinction
OTC market (over-the-counter) / CFD (contract for difference)
CFD is an instrument type; OTC describes off-exchange trading.
Check your understanding
Identify the trading arrangement from documents rather than interface design.
Show the answer and explanation
No, transaction structure and documents are needed
Interface appearance does not establish the legal venue.
From provider structure to confirmation
Step 1 / 10 · 0 / 10 reviewed
View the full sequence →Progress is saved only in this browser.
Read the fuller explanation
Related terms
Sources and documentation
- BCBS/BIS: Foreign exchange risks — Basel Consolidated Guidelines, RMA20
The guidelines define a wholesale FX swap as a currency exchange combined with a reverse exchange with the same counterparty at a later date.
Document read: - FCA — CP16/40, Chapter 2: CFD provider business models
Historical consultation, sections 2.2 and 2.9: the CFD counterparty and external hedging are separate matters. This is not evidence of current leverage limits.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.