A person who is involved in the trading market knows that a transaction usually happens over the counter. But you also have to overlook the inherent structure of the market to ensure your profits. Understanding the structure of the forex market is also a crucial element that helps in designing better trading strategies.
As it is the currency pairs that act as the most important element for OTC foreign exchange, it is vital that you govern the regulations along with the overall size of the FX Market.
What is Over the Counter Trading?
Let’s start with a simple analogy. You might have heard that sometimes, people buy over the counter drugs. The same theory applies to trade.
Over the Counter Trading or Off-Exchange trading is done directly without any kind of supervision. The term OTC is contrasted with the Exchange trading which occurs with exchanges. OTC has become one of the major parts of the global finance of the world. Its derivative is growing exponentially and getting positive responses.
The key features of the OTC Forex market include the following:
- The absence of the centralized exchange system that regulates trade
- Standard Pricing System is unavailable and prices depend on the market dynamics
- To connect traders globally and enable the short and long distance transactions, state-of-art networking is provided
- One of the key catalysts for Forex trade is the presence of the inter-bank The inter-bank brings the liquidity and efficiency of the over the counter trades in front of traders.
Normally the stock exchange has the benefit of utilizing liquidity that provides transparency and maintains the current market price. But in OTC trade, the price is inconsiderate and not published for the public.
As the trading in Forex market isn’t channelized via centralized exchange, the trades on forex products are made via a market medium or a market maker. It is the bank or a forex brokerage that helps in facilitating the desired trade. This is the way you buy and sell the quotes from the customers and takes orders from them. In addition, the market place is not regulated by a Governing body, plus the prices are also market determined. This leads to heavy competition and variation in the price. The demand and supply dynamics have a huge impact on the live prices and ultimately on the OTC Foreign exchange.
If you choose BYFX Global to trade in OTC spot FX, then you will get the best pricing. The string market depth will help you to get better exchange prices and value. To start trading, the only step you need to take is to sign up with BYFX. They aggregate the Liquidity and other factors from Tier-One banks, Non-Banks, and ECNs from Japan and APAC. You won’t find the same competitive pricing and offers someplace else.
You will be able to enjoy tighter spreads of the currency pairs, low deposits, and additional leverages. They have a client portal too which has only one goal, to provide you information relevant to trading.