XMVisit XM77,37% of retail investor accounts lose money
IG MarketsVisit IG Markets70% of retail CFD accounts lose money
AvaTradeVisit AvaTrade79% of retail investor accounts lose money
PepperstoneVisit Pepperstone74-89% of retail investor accounts lose money when trading CFDs
Saxo BankVisit Saxo Bank72% of retail investor accounts lose money
CMC MarketsVisit CMC Markets78% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider.
FP MarketsVisit FP Markets74-89% of retail CFD accounts lose money
FXTMVisit FXTM81% of retail investor accounts lose money
HF MarketsVisit HF Markets70.51% of retail investor accounts lose money
FXCMVisit FXCM70% of retail investor accounts lose money
An Over-The-Counter (OTC) Forex broker refers to a dealer or broker who facilitates the trading of foreign currencies directly between two parties, without the need for a centralized exchange. These transactions are conducted via an electronic network, usually referred to as the “Interbank Market.”
In today’s global landscape, referring to a ‘forex trading brokerage’ necessarily implies referring to an OTC forex broker. They are synonymous in essence.
In the OTC forex market, dealers and brokers negotiate directly with each other, which can lead to a wide variety of prices on the same currency pairs. This is different from trading on a centralized exchange like those of stock trading, where every participant has access to the same pricing.
OTC forex brokers can offer their clients a range of services including spot trading, forward contracts, and options contracts. They make their money through the spread, which is the difference between the buying and selling price of a currency pair.
In this article, we have included the most trusted OTC forex brokers for traders who wish to be part of this OTC market.
To make a choice, we considered many factors, including:
- The number of OTC forex pairs;
- The total number of OTC derivatives;
- The regulation of the broker;
- The overall quality of the service.
|BROKERS||OTC DERIVATIVES||REGULATED BY|
|XM||1.000+||ASIC, CySEC, DFSA, FSC|
|IG Markets||17.000+||FCA, ASIC, BaFiN, DFSA, FSCA, MAS, FMA, FINMA, JFSA, NFA, BMA|
|AvaTrade||200+||ASIC, CBI, FSCA, JFSA, FFAJ, BVI|
|Pepperstone||180+||FCA, ASIC, CySEC, DFSA, CMA, SCB|
|Saxo Bank||40.000+||FCA, ASIC, MAS, FINMA, UAE Central Bank, JFSA|
|CMC Markets||10.000+||FCA, ASIC, BaFiN, MAS, FMA, IIROC|
|FP Markets||10.000+||ASIC, CySEC,SV|
|FXTM||250+||FCA, CySEC, FSCA, FSC|
|HF Markets||1.000+||FCA, CySEC, DFSA, FSCA, FSC|
|FXCM||100+||FCA, ASIC, CySEC, FSCA|
What are the best OTC forex brokers?
Below our cureated list of the best OTC forex brokers, with details about features and characteristics.
What is the difference between the OTC forex market and traditional exchange trading?
The OTC forex market refers to a decentralized trading environment where forex transactions are not routed through a central exchange. Instead, OTC trading is done directly between two parties, typically enabled by a network of banks, brokers, and dealers. Over the counter trading is often associated with flexibility due to its 24/7 operation, wide range of currency pairs, and possibilities for customization of contracts.
On the other hand, traditional exchange trading operates through centralized exchanges where all trades are conducted. This trading system offers more transparency as the exchange provides all the market participants with the same price information. It is regulated and standardized, providing traders with certain legal protections but it usually limits the trading hours and the range of tradable instruments.
These differences between the OTC market and traditional exchange trading represent unique advantages and considerations for traders, depending on their specific needs and trading strategies.
What are the pros and cons of OTC forex brokers?
- 24/7 trading flexibility across different time zones.
- Decentralized Over The Counter markets with a continuous trading environment.
- Wider range of currency pairs.
- Customizable trade sizes and leverage.
- Different brokerages might quote slightly different prices for the same forex pair.
- Market makers brokers may be the counterparty to your trade.
- Not all OTC brokers are regulated equally.
How do I choose the best broker for over the counter markets?
Choose a regulated OTC forex brokerage
Choosing a regulated broker providing OTC markets should prioritize brokers with recognized regulatory credentials. This step ensures two main benefits. Firstly, it validates the broker’s permission to provide forex trading within your jurisdiction. Secondly, it provides you with a direct channel to the financial industry regulatory authority, enabling support mechanisms. Therefore, aligning with a regulated entity enhances trading security and recourse options.
Choose a forex brokerage with low fees
In OTC trading, cost-monitoring remains paramount. Typically, Over The Counter brokers levy fees based on the forex spread, which represents the differential in the buy and sell prices in the fx market. Additionally, there are other fees not directly related to OTC trading to keep in mind such as swap fees, deposit/withdrawal fees, and inactivity fees that can hinder your profitability.
Choose an educational forex brokerage
It is a foundational requirement for the brokerage to provide you with a demo account. This allows you to simulate and refine your otc trading methodologies in a risk-free environment. Additionally, the broker should supply timely news and analysis focused on the OTC markets, in order for you to remain informed and abreast of market dynamics.
How do OTC forex brokers make money?
Commonly, forex brokers earn through the forex spread, which signifies the differential between the buy and sell prices of OTC markets. Additionally, some might charge commission fees or other transactional charges in the over the counter markets.
The spread is often variable in OTC trades, influenced by financial markets dynamics, liquidity, and broker-specific policies. Furthermore, brokers might also gain from overnight interest differentials, known as the swap or rollover rates, when traders hold OTC trades overnight.
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