A trade that is negotiated between two parties without the use of an exchange.
For example, a security that is not traded on an exchange is known as an OTC security. It is a market where commodities and instruments are traded directly between two parties, for example, between an investment bank and a client.
This is different from trading on a public exchange, which is an open market place.
Over-the-counter products can be tailored to individual clients whereas exchanges trade standardised contracts.
A large over-the-counter market has grown up in, for example, Forex and Forex Options.