In an OTC market, transactions occur directly between two parties without the involvement of a central exchange.

The stock market is typically conducted on a centralized exchange, while OTC markets are decentralized.

OTC markets often have lower transaction costs compared to centralized exchanges due to the absence of intermediaries.

OTC markets are generally less regulated than centralized exchanges, which can increase the risk of fraud and abuse.

The CFTC is responsible for regulating futures and options markets, including OTC derivatives.

A clearinghouse acts as an intermediary between buyers and sellers, ensuring the smooth settlement of trades and reducing counterparty risk.

Forward, swap, and option contracts are all standardized OTC derivative contracts with predetermined terms and conditions.

Market makers are participants in OTC markets who are willing to buy and sell financial instruments at quoted prices, providing liquidity and facilitating trading.

Dealers are market participants who trade for their own account, taking on risk, while brokers act as intermediaries between buyers and sellers, facilitating transactions.

The growth of OTC markets has been driven by a combination of factors, including increased globalization, technological advancements, and deregulation of financial markets.

Equity options are typically traded on centralized exchanges, while the other instruments mentioned are commonly traded OTC.

Regulating OTC markets is challenging due to the lack of transparency, the complexity of financial instruments, and the global nature of these markets.

A CCP acts as an intermediary between buyers and sellers, becoming the counterparty to both sides of a trade, thereby reducing counterparty risk.

Energy, commodity, and real estate markets are all examples of non-financial OTC markets where goods and assets are traded directly between parties.

OTC market reforms aim to increase transparency, reduce systemic risk, and protect investors by addressing the challenges and risks associated with these markets.