What is an OTC desk?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
An OTC desk arranges large trades bilaterally, away from an exchange order book. Putting a large order on a book moves the price against you, so finding a counterparty and filling in one block can be the better route. It is worth knowing that trades invisible to exchange prices happen here.
Key points
- Arranges large bilateral trades off the order book
- Fills without moving the visible market
- Prices are negotiated and can differ from the book
- Carries counterparty and settlement risk
Definition
A service that brokers or executes large crypto trades bilaterally rather than through an exchange order book, with prices set by negotiation or a quote.
An exchange book holds only so much size. A large market order eats through it, pushing the price as it fills, so the average ends up far from the quote you saw. An OTC desk matches a buyer and seller who both want to avoid that, filling the whole size at a single price.
There are two models. A principal desk takes the other side from its own inventory; an agency desk matches two clients. A principal desk can quote instantly, but it absorbs the price risk, and that is priced into the quote.
Because the trade is bilateral, the settlement guarantee an exchange provides is absent. The order in which assets and payment change hands, whether an escrow is used, and how identity and source of funds are verified all become material. Executed prices are not published, so these trades never appear in public volume statistics.
Watch out for
- · Bilateral settlement means you carry the risk the other side does not perform
- · Quotes often embed the fee and spread rather than showing them
- · Individuals offering large swaps over social media are frequently scams