Over-The-Counter Trading Services Become Next Key To Secure Institutional Investments
Looking at the trend right now, it looks like Over the counter trading is the key to institutional investment. It hasn’t even been a month since when Coinbase had announced the launch of OTC trading for an institutional customer. Coinbase has opened the doors for OTC trading, a process that involves two parties directly, rather than a middleman.
Usually, this type of investment is performed with a bank and a client, but Coinbase has modified this trading opportunity for their own platform.
Speaking on this development, Coinbase Head of Sales Christine Sandler said, “We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading. We felt this was a huge benefit to our clients to actually leverage both our exchange and our OTC business.”
Monica Summerville, director of fintech research at Tabb Group, a U.K.- based market research firm, said that these larger investors should go to OTC desks. About it, she commented:
“The big deals have to go OTC. A lot of the exchanges limit the order size, so you have to break up your orders, and that’s just fatal.”
If a company wants to execute a massive trade, for example, 1,000 BTC, it will be very difficult for any exchange to be able to offer liquidity for this amount of funds at a certain price. This seller would trigger a slippage, according to Stanley, in which the price of a trade execution is different from the one expected.
For many investors, there is little practical difference between OTC and major exchanges. Improvements in electronic quotation and trading have facilitated higher liquidity and better information. However, there are key differences between the transaction mediums.
On an exchange, every party is exposed to offers by every other counterparty, which may not be the case in dealer networks. There is less transparency and less stringent regulation on these exchange,” so unsophisticated investors take on additional risk and could be subject to adverse conditions.
In the last twelve months, these OTC markets have grown significantly. There are more investors entering the space that are also more sophisticated. Some of these companies and wealthy individuals trade through brokers such as Octagon Strategy, Genesis Trading, Circle and others.