Over the Counter Vs. Exchange Traded Markets

The speaker provides an explanation on the differences between over the counter markets and exchange traded markets as it relates to the forex market.

In exchange traded markets, the exchange is the counterparty to all of the trades.  Additionally, there is price standardization and execution.  One negative these exchanges involves less price competition. 

OTC, or over the counter markets, have no centralized trading facility.  This promotes heavy competition between counterparties and lower transaction costs.  The lack of regulation can introduce fraudulent firms and transaction execution quality may decrease.