Finxflo Makes OTC Trading And Dark Pool Trading Available To Everyone

The most common ways that most of us buy crypto is either direct Peer to Peer, a Peer to Peer platform with escrow such as Buylocalbitcoins or a licensed cryptocurrency broker, or a centralized exchange. There are also decentralized exchanges where you don’t relinquish custody of your coins but they can suffer from liquidity issues, especially for lower market cap coins.

The majority of cryptocurrencies are traded on exchanges. An exchange is a marketplace that brings together all market participants such as brokers, dealers, buyers, sellers together in one place.

Over-the-counter (OTC) is the trading of securities between two counterparties executed outside of formal exchanges and without the supervision of an exchange regulator. OTC trading is done in over-the-counter markets (a decentralized place with no physical location), through dealer networks.OTC trades are not published on public order books.OTC markets have much larger trading volumes and liquidity than traditional exchanges. They offer a solution to wealthy parties who want to transact large amounts.

People who want to trade very large volumes of crypto, however, face some unique issues. One of the issues is time. It is much more time-efficient to place one order than having to fill multiple buy or sell orders. Another issue when someone wants to transact large amounts of crypto is price slippage. For example, if someone wanted to offload a large amount of an asset in OTC trading the parties would agree to a price for the whole amount and execute one single trade. However, on a traditional exchange, the price would face significant price slippage due to a lack of buy orders. Another advantage is privacy because as previously mentioned a party’s trades are not published on any public order book.

Dark pools let parties make large transactions in complete privacy, there is no visible order book, and trades are not publicly visible (or only become visible once they already have been executed). With dark pools, neither the buyer nor the seller is aware of the volume or price of the counterparty. This ensures that there is no risk of any market influencing information being accidentally or purposefully disseminated.

Although OTC trading and in particular dark pools face some scrutiny for their lack of transparency they both play a vital role in the cryptocurrency ecosystem providing liquidity and privacy.