OTC - A $700 Billion Opportunity

Definition of 'Over-The-Counter - OTC':  A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network as opposed to on a centralized exchange. It also refers to debt securities and other financial instruments such as derivatives, which are traded through a dealer network.

Dr. Bruce Rader is talking OTC and people are listening.  Given that its a $700 Billion market, it's worth knowing a little something about the opportunity.  Come hear Dr. Rader on Wednesday, February 20th at his Knowledge Leadership Series or download his supporting white paper.

Here's a synposis from the white paper:   "One of the fastest growing segments in finance is the derivative’s markets. The Over the Counter (OTC) derivative markets are an unregulated segment of these markets.  A derivative is a security that derives its value from some other asset hence the term derivative.  These are in essence contracts on those underlying assets that trade in what is known as the cash or spot market.  The types of cash market instruments, which are the basis for derivative contracts, are extensive ranging from commodities to currencies to financial instruments. The main categories of derivatives are Forwards, Options and Swaps.


These contracts are between individual entities and generally fall outside of a regulatory structure even thought there are usually some regulated equivalent. An example of this is that Forward Contracts are on not regulated while Futures Contracts (A refinement of the Forward Contract Concept) are regulated.  The need or existence of any derivative contract is driven by the need to reduce risk.  They are risk control instruments that allow the transfer of risk from those who wish to reduce risk (hedgers) to those who are able to bear that risk (speculators). The growth in the markets is directly related to the increase risk (volatility) in the global market in the past decades. As such derivatives are sometimes thought of as unregulated insurance markets.

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