OTCmarkaðir

OTCmarkaðir refers to over-the-counter markets. These are financial markets where trading occurs directly between two parties, rather than through a centralized exchange like a stock exchange. In an OTC market, buyers and sellers negotiate terms and prices directly with each other, often through dealers or brokers.

A key characteristic of OTC markets is their decentralized nature. This means that there isn't a single physical location or regulated exchange where all transactions take place. Instead, trading can happen electronically or over the phone. This flexibility allows for a wider range of financial instruments to be traded, including those that might not be listed on traditional exchanges.

OTC markets are known for their customization. Because trades are direct negotiations, parties can tailor the specific terms of a contract, such as the maturity date, interest rate, or underlying asset, to their unique needs. This is particularly common in derivatives markets.

However, the decentralized and less regulated nature of OTC markets can also present risks. Transparency can be lower compared to exchange-traded markets, and there is a greater risk of counterparty default. Regulatory oversight varies significantly across different OTC markets and jurisdictions. Common examples of instruments traded on OTC markets include foreign exchange, bonds, and various types of derivatives like swaps and forwards.