OTC (over-the-counter) trading

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In the context of metals trading, OTC (over-the-counter) trading refers to an agreed forward trading position between trader and client that is not a standard contract in the sense that it is not arranged and transacted on a commodities exchange such as the London Metal Exchange.

OTC contracts are established between traders or brokers and their clients over the telephone or electronically, rather than on the trading floor. A key attraction of these contracts compared to futures contracts is their flexibility. An OTC contact can be for a grade or quantity of metal mutually agreed with the broker, while exchange-listed futures have to be traded for the specifications detailed in the futures contract and can only be traded in multiples of the fixed lots sizes of the contract.

OTC also allows trading of exchange listed products to continue outside of exchange opening hours. This form of transaction is also very useful for brokers and traders who are too small to meet the requirements to trade an exchange listed future, or elect not to do so. And for more detail click and see wikipedia entry.


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