OTC Desk
An OTC (Over-the-Counter) desk facilitates large asset trades directly between parties without using a public exchange. OTC desks are crucial for institutions, hedge funds, and high-net-worth individuals who need to execute large trades without significantly impacting market prices.
Differences between an OTC Desk from an Exchange
| Feature | OTC Desk | Exchange |
|---|---|---|
| Execution | Private, direct trading | Order book matching |
| Liquidity | Custom quotes, deep liquidity | Market-dependent liquidity |
| Price Impact | Minimal impact on market price | Large orders may cause slippage |
| Anonymity | High, trades are private | Publicly visible order books |
| Trading Pairs | Custom, flexible | Standardized trading pairs |
Top OTC Desks
| OTC Desk | Industry | Geolocation | Minimum Requirements |
|---|---|---|---|
| Wintermute | Crypto | Global (UK-based) | Custom, typically $100K+ |
| Genesis Global Trading | Crypto | USA | $250K+ |
| Cumberland (DRW) | Crypto | Global (USA-based) | $100K+ |
| Galaxy Digital | Crypto | USA, Global | $250K+ |
| B2C2 | Crypto | UK, Global | $50K–$100K+ |
| Jane Street | Stocks | USA, Global | Institutional clients only |
| Virtu Financial | Stocks | USA, Global | Institutional clients only |
| Citadel Securities | Stocks | USA, Global | Institutional clients only |
| Susquehanna Int’l Group | Stocks | USA, Global | Institutional clients only |
OTC desk versus Market Maker
A market maker provides liquidity to both exchanges and OTC desks by continuously quoting buy and sell prices. They help stabilize prices and improve market efficiency. Some OTC desks act as market makers by sourcing liquidity internally.
Example
- OTC Desk: A hedge fund wants to buy $50M in Bitcoin without moving market prices. The OTC desk sources liquidity and executes the trade discreetly.
- Exchange: A retail trader buys 1 BTC on Binance at market price, triggering an order book transaction.
- Market Maker: A firm like Wintermute continuously provides buy and sell quotes for BTC/USDT across exchanges and OTC desks.
How to Access an OTC Desk?
- Onboarding & Verification (KYC/AML):
- Fill out an application with identity and business verification.
- Provide proof of funds and compliance with KYC/AML regulations.
- Set Up Communication Channels:
- OTC desks operate via chat-based platforms (e.g., Telegram, WhatsApp, Slack) or RFQ (Request-for-Quote) systems.
- Trade Execution:
- Request a quote for a trade (e.g., “Buying 500 BTC at market”).
- The desk provides pricing and executes upon agreement.
- Settlement Process:
- Trades typically settle via wire transfer, stablecoins, or direct asset transfers within a specified timeframe.
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