The Over-the-Counter Market Size, Trends, Competitive, Historical & Forecast Analysis to 2022-2028, Factors such as rapid adoption of OTC trade by small enterprises and rising popularity of OTC in trading are driving the growth of the Global Over-the-Counter Market.
The Global Over-the-Counter Market is expected to grow with a significant CAGR over the forecast period (2022-2028).
In trading, over-the-counter (OTC) acts as a tool where securities of unlisted companies are traded between dealers or brokers without any management system of a formal exchange. Actually, it is the trading of securities between two counterparties executed outside of formal exchanges and without the supervision of an exchange regulator. It is done in over-the-counter markets (a decentralized place with no physical location), through dealer networks. There are a number of products available of OTC with all the choices, which includes OTC trading, as well as exchange trading, that occurs with financial instruments (including stocks), commodities, and derivatives of such products. It involves companies that cannot keep their stock above a certain price per share, or who are in economic failure filings and these companies are not able to trade on an exchange but can be able to trade on the OTC markets. The buying process is relatively easy for this as they trade like most other stocks. This kind of trading does not require the trading of only standardized items (e.g., clearly defined range of quantity and quality of products) and also, prices are not always published to the public. OTC contracts are bilateral, and each party could face credit risk concerns regarding its counterparty.
Covid-19 has also impacted the growth of the global over-the-counter market with the economic downturn in its aftermath, its full implications remain unknown, and also as actions were taken by local authorities in response to the spread of Covid-19 have shown a major impact on payments, settlement, and pricing in respect of derivatives transactions. Thus, market participants should closely evaluate their trading documentation and related product definitions to determine what impact such disruptions may have on outstanding trades.
Some of the key players for the global over-the-counter market are such as:
The Global Over-the-Counter Market is segmented on the basis of core areas type, investments, and region & country level. On the basis of core areas type, the global over-the-counter market is classified into trading services, market data, and corporate services. On the basis of investments, the global over-the-counter market is classified into penny stocks, bonds, derivatives, ADRs, and currencies.
The regions covered in this Global Over-the-Counter Market report are Asia-Pacific, North America, Europe, and the Rest of the World. Based on a country level, the market of global over-the-counter is subdivided into the U.S., Mexico, Canada, U.K., France, Germany, Italy, China, Japan, India, Southeast Asia, Middle East Asia (UAE, Saudi Arabia, Egypt) GCC, Africa, etc.
On December 21st, 2021; Berlin-based Swarm Markets GmbH, the first regulated decentralized financial infrastructure provider, announces it will launch a peer-to-peer contract for high-value transactions in Q1 2022. The so-called dOTC service empowers institutions and professional investors to use the first regulated crypto block-trade smart contract in place of traditional over-the-counter (OTC) trading.
On October 4th, 2021; Business Insider Inc. Company stated that an over-the-counter stock, which is an OTC market segment has long been dominated by retail investors. It has attracted unprecedented levels of interest as the Securities and Exchange Commission looks for cleaning up the fraud-prone segment. So, according to the first data reported by the Wall Street Journal, in 2021, about USD 548 billion in trading volume has been registered by the OTC markets group, which has run the main marketplaces for penny stocks and other unconventional securities.
On September 2nd, 2021; CME Group which is the world's leading & most diverse derivatives marketplace, and IHS Markit which is a world leader in analytics, critical information, & solutions, has announced that they have launched their joint project, OSTTRA which is a new post-trade services company. It is for the global OTC markets across equity, interest rate, FX, and credit asset classes.
Various benefits offered by OTC in trading are one of the major factors increasing the adoption of OTC trading among small enterprises. OTC trading does not use a centralized trading mechanism, such as a specialist, an auction, or limit-order book and allocating trades. Instead, buyers & sellers can exchange terms privately, often in ignorance of the prices currently available from other potential counterparties & with limited knowledge of trades recently negotiated elsewhere in the market. Number of companies are taking efforts to go through this trading with much of the debate focusing on measures to address the issues of counterparty credit risk and non-transparency. For example; according to OTC Markets Group, more than about 500 “small” U.S. public companies (mainly those having a market cap of less than $250M) trade on the OTCQX and OTCQB markets operated by OTC Markets Group company across over 40 states in the U.S. Around 60 companies graduate to an exchange listing from the OTC market each year and more than 300 in the past five years from 2021, making them the most successful ‘venture’ markets in the world. Thus, with its increasing use, the OTC trades are generally considered superior to exchange-traded derivatives in users’ willingness for customization to provide specific risk management needs of users.
In addition, rising popularity of OTC in trading is also supplementing the market growth. OTC in trading is an equally important alternative to exchange-traded markets and when measured in terms of volume, it is larger than other traded markets such as exchange-traded markets. Furthermore, over-the-counter markets play an essential element in the global finance. OTC derivatives possess exceptional significance and also provides greater flexibility to market participants enables them to adjust derivative contracts to better suit their risk exposure. OTC trading increases overall liquidity in financial markets, as companies that cannot trade on the formal exchanges gain access to capital through over-the-counter markets.
However, drawbacks and risks associated with OTC in trade may hamper the growth of the market. Despite this, new innovative business models and technologies in this field may provide more opportunities for the further growth of the growth.
Geographically, North America is expected to dominate the global over-the-counter market owing to the increasing adoption rate of OTC in trades specifically in the United States. The numbers of key players in the United States are already having a large market share with the presence of key players which are leading in the market. In the United States, over-the-counter trading of stocks is carried out through networks of market makers. For example; The two well-known networks are managed by the OTC Markets Group and the Financial Industry Regulation Authority (FINRA). For example, OTC Markets Group Inc. operates the trade security services such as the OTCQB Venture Market, OTCQX Best Market, and the Pink Open Market for 10,000 U.S. and global securities. Also, a number of companies are entering the market with mergers and acquisitions for increasing their investor awareness and build their North American brand & gain secondary access to the broad pool of U.S. investors.
For example; on December 7th, 2021, OTC Markets Group Inc. announced that Humble & Fume Inc., a leading North American distributor of cannabis and cannabis accessories has qualified to trade on the OTCQX Best Market. Humble & Fume Inc. upgraded to OTCQX from the Pink market. This up-gradation to the OTCQX Market by Humble & Fume Inc. was an important step for companies who are looking to provide transparent trading for their U.S. investors. Also, on October 2nd, 2017; OTC Markets Group Inc., and the Canadian Securities Exchange (CSE), announced that the company will launch a strategic alliance that will offer a new program to issuers who are seeking an efficient IPO experience in Canada & cost-effective access to North American investors. Also, this solution will offer issuers the CSE’s IPO listing and trading services that are combined with the enhanced U.S. disclosure distribution & secondary trading on OTC Markets’ OTCQX Best Market/OTCQB Venture Market.
In addition, as per the analysis of Brandessence Market Research, Europe is also expected to witness significant growth in the global OTC market owing to increasing advancements in the OTC trade services by leading key players of the market. For example; on December 21st, 2021; Swarm Markets Company launched the first regulated decentralized OTC trading and it is the first regulated decentralized financial infrastructure provider and it will launch a peer-to-peer contract for high-value transactions in 2022. This dOTC service empowers institutions and professional investors to use the first regulated crypto block-trade smart contract in place of traditional over-the-counter (OTC) trading.
Also, in Europe, high volume swap activity has increased significantly in 2020. For example; According to a report by Messari Hub, the number of unique traders executing trades over USD 500k has increased by 140% from March to September 2021 in Europe. And as swaps are nothing but customized contracts that are traded in the over-the-counter (OTC) market between private parties. In addition, according to Association for Financial Markets in Europe, the proportion of European equities trading that is over-the-counter (‘OTC’) represented by ‘real’ OTC trades is around 16%. This shows the market is growing at a high rate in Europe.
|Historical data||2015 - 2020|
|Forecast Period||2021 - 2028|
|Market Size in 2021:||USD XXX Million|
|Base year considered||2020|
|Forecast Period CAGR %:||
|Market Size Expected in 2028:||USD XXX Million|
|Tables, Charts & Figures:||175|
|Over-the-Counter (OTC) Companies||OTC Markets Group, OTC Trade, Swarm Markets, OTC Global Holdings, Circle Internet Financial, Inc., Icap,Tullett Prebon, BGC Partners, Compagnie Financière Tradition, others|
|Segments Covered||By Core Areas Type, By Investments|
|Regional Analysis||North America, U.S., Mexico, Canada, Europe, UK, France, Germany, Italy, Asia Pacific, China, Japan, India, Southeast Asia, South America, Brazil, Argentina, Columbia, The Middle East and Africa, GCC, Africa, Rest of the Middle East and Africa|
Middle East and Africa
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