How OTC trading works
An OTC market has no central matching engine. Dealers quote the prices at which they will buy and sell, and trades are agreed bilaterally between the two parties. The market is a network of these relationships rather than a single location, which makes it flexible and well suited to instruments that do not fit a standardized exchange listing.
OTC versus exchange-traded
The difference from an exchange is structural. An exchange concentrates orders in a single transparent book and produces one public price, whereas an OTC market distributes activity across many dealers, so prices can vary between quotes. Both models are legitimate and widely used. Standardized, high-volume assets are often well suited to exchanges, while many other instruments trade more naturally over the counter.
Where OTC markets are found
OTC trading is not a marginal activity. Some of the largest and most liquid markets in the world are predominantly over-the-counter, including spot trading in currencies, much of the bond market, and a range of commodities and metals. Their scale demonstrates that exchange trading is one model among several rather than the default for all instruments.
Pricing in an OTC market
Without a central book, an OTC market has no single official price. Different dealers may quote the same asset slightly differently at the same moment, reflecting their own inventory and view. This is the situation in which an aggregated reference price is most useful: combining quotes from several independent sources and filtering outliers yields one representative value for a market that has no inherent headline price.
Pricing decentralized markets on SiftingIO
Decentralized markets are a central reason SiftingIO exists. In a market with no central exchange, such as spot currencies, there is no single official price to read, so SiftingIO aggregates quotes from multiple independent sources into one fair price on a continuous clock and publishes it under the same schema as every other market. This produces a single representative value for a fragmented, dealer-based market.