How an OTC trade works
The client asks a desk for a price on a size, by chat, phone or an electronic request for quote. The desk answers with a price that holds for a few seconds, and the client accepts or declines.
On acceptance the desk is the counterparty. It delivers from its own inventory or hedges on exchanges and with other liquidity providers, and keeps the spread between its price to the client and its own cost.
Settlement follows by bank transfer and blockchain transfer, either with the client paying first or through accounts both sides have already funded.
Who uses OTC trading
- Funds, family offices and wealthy individuals trading in size
- Miners, token issuers and treasuries converting holdings
- Payment firms and exchanges that need stablecoin or fiat liquidity
- Brokers and on-ramps that source prices for their own customers
How OTC trading is regulated in the EU
A firm that buys or sells crypto-assets with clients using its own capital provides the exchange of crypto-assets for funds, or for other crypto-assets, under MiCA. Article 77 requires such a firm to publish a firm price or its pricing method, and information about the transactions it concludes, such as volumes and prices.
The desk onboards each client with identity and source-of-funds checks and screens incoming transfers, since a single trade can be very large.
OTC desk, exchange or broker?
- Exchange
- Many participants' orders meet in a public book, and a large order fills across several price levels.
- Broker
- Passes the client's order to a venue or dealer for execution and is not the counterparty.
- Peer-to-peer (P2P) marketplace
- Individuals trade with each other, with the platform holding the asset in escrow.
Where OTC trading shows up in a platform
Modules that do the work
- FXCurrency conversion with live rates, your margins and the liquidity provider you choose.
- KYC / AMLIdentity checks, screening and ongoing monitoring, with the verification provider you choose.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
- Custody & walletsWallets on every major chain, with MPC custody from leading providers or your own keys.
Platforms that need it
Guides that go deeper
- How to start a crypto OTC desk: RFQ, liquidity and licensingHow a crypto OTC desk works from request for quote to settlement, principal or agency, liquidity and pre-funding, and the licence it needs: MiCA in the EU, VARA in Dubai, the FCA in the UK.
- What a crypto exchange licence costs: fees and capital by regulatorThe application fee, the yearly fee and the capital a crypto exchange needs under MiCA, the FCA, VARA, ADGM and the DFSA, as each regulator publishes them, and when each falls due.
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.