XM
Visit XM
77,37% of retail investor accounts lose money
10 Best OTC Forex Brokers for 2023
Top Picks
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IG Markets
Visit IG Markets70% of retail CFD accounts lose money -
AvaTrade
Visit AvaTrade79% of retail investor accounts lose money -
Pepperstone
Visit Pepperstone74-89% of retail investor accounts lose money when trading CFDs -
Saxo Bank
Visit Saxo Bank72% of retail investor accounts lose money -
CMC Markets
Visit CMC Markets78% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. -
FP Markets
Visit FP Markets74-89% of retail CFD accounts lose money -
FXTM
Visit FXTM81% of retail investor accounts lose money -
HF Markets
Visit HF Markets70.51% of retail investor accounts lose money -
FXCM
Visit 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.
Table of Content
Round-up
| 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 |
Warning
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
What are the best OTC forex brokers?
Below our cureated list of the best OTC forex brokers, with details about features and characteristics.
- With XM you can trade over 1000+ OTC derivatives in total from different markets.
- Among the markets available there is forex, stocks, commodities, and indices.
- There are 57 forex pairs available to be traded.
- With XM spreads on EUR/USD start from 0.1 pips.
- IG markets offer over 17,000 derivatives in total. The amount can be slightly lower depending on where the trader is based.
- These include markets such as forex, indices, shares, commodities, interest rates, bonds, turbo warrants, and other assets for professional traders.
- There is a good number of tradable forex pairs (80 in total), and spreads on forex start from 0.6 pips.
- UK forex traders can also have access to spread betting.
- With AvaTrade you can engage in OTC forex trading with fixed spreads.
- Spreads with this broker start at 0.9 pips, but they are even lower for professional traders.
- Apart from 60 forex pairs, you can also trade over 200 OTC derivatives which include indices, stocks, bonds, and cryptocurrencies.
- UK AvaTrade traders can spread bet on forex as well.
- Pepperstone is known for their extremely low spreads across the derivatives they offer.
- Spreads start from 0 pips, with an average of 0.09 pips on the EUR/USD pair.
- More than 60 OTC forex pairs are available to trade, with more than 100 additional instruments across different markets.
74-89% of retail investor accounts lose money when trading CFDs
- Saxo Bank has a wide range of OTC derivatives of 40,000 tradable instruments, including commodities, indices, stocks, bonds, options, and mutual funds.
- Forex CFDs are also available with over 200 tradable pairs.
- Spreads on forex are kept very low starting at 0.6 pips.
- CMC Markets is a broker known for offering a huge number of forex pairs traded as CFDs. These are 330 in total, and are traded with low spreads starting from 0.3 pips.
- There are also other over 10,000 tradable OTC derivatives at CMC.
- For UK forex traders who want to engage in spread betting, it is available.
78% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider.
- With FP Markets you can trade OTC derivatives with extremely low spreads and very fast order execution of 66 ms on average.
- Over 4,000 derivatives are made available in total, and among these, you can find 70+ forex pairs.
- Spreads on forex start from 0.2 pips.
- FXTM is an OTC derivatives broker regulated in many countries. In the EU, however, they accept professional traders only.
- They offer a limited amount of tradable derivatives of around 250 instruments across different markets.
- When it comes to forex, they offer 60 tradable pairs with spreads from 0.3 pips.
- HF Markets offers a good range of over OTC derivatives, including 50 forex pairs.
- Among these, you can also trade other 1000 derivatives from different markets: indices, stocks, commodities, bonds, and cryptocurrencies.
- Spread on EUR/USD from 0.1 pip.
- Over 100 tradable derivatives which include: forex, shares, indices, commodities, bonds, and cryptocurrencies.
- More than 30 tradable forex pairs in total with spreads from 0.2 pips.
- UK traders have access to spread betting.
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?
Pros
- 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.
Cons
- 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.
About The Author
Filippo Ucchino
Co-Founder - CEO - Broker Expert
Filippo is the co-founder and CEO of InvestinGoal.com. He has 15 years of experience in the financial sector and forex in particular. He started his career as a forex trader in 2005 and then became interested in the whole fintech and crypto sector.
Over this time, he has developed an almost scientific approach to the analysis of brokers, their services, and offerings. In addition, he is an expert in Compliance and Security Policies for consumers protection in this sector.
With InvestinGoal, Filippo’s goal is to bring as much clarity as possible to help users navigate the world of online trading, forex, and cryptocurrencies.
10 Best OTC Forex Brokers for 2023
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