OTC Trading Glossary

A regulatory framework of laws, regulations, and procedures designed to prevent the use of financial systems for money laundering. OTC desks are required to maintain AML programmes that include customer due diligence, transaction monitoring, and suspicious activity reporting. See also: Exchange Capital AML Policy.

An execution model where the OTC desk acts on behalf of the client to source liquidity in the market, rather than taking the position on its own book. The desk earns a fee or commission rather than the bid-offer spread. Contrast with: principal execution.

The volume-weighted average price at which a multi-leg or large trade is executed across all constituent fills. On a public exchange, large orders may be filled at multiple price levels, resulting in an average that differs from the initial quote. OTC execution provides a single firm price, eliminating average price uncertainty.

A business-to-business OTC trading desk that operates exclusively with corporate and institutional counterparties. B2B OTC desks do not accept retail clients or individuals trading in a personal capacity. Exchange Capital is a B2B-only OTC desk.

The natural person who ultimately owns or controls a legal entity, typically defined as holding 25% or more of equity or voting rights. OTC desks are required to identify and verify all beneficial owners as part of KYB/KYC onboarding. See: Ultimate Beneficial Owner.

The difference between the price at which an OTC desk will buy an asset (bid) and the price at which it will sell (offer/ask). The spread represents the desk's primary remuneration on principal trades. Tighter spreads indicate more competitive or liquid market conditions.

A transaction conducted directly between two parties — the OTC desk and the counterparty — without a centralised exchange or intermediary. All OTC trades are bilateral. Settlement obligations exist only between the two parties to the trade.

A large-volume transaction executed as a single unit, typically at a negotiated price away from the public market. Block trades are the primary use case for institutional OTC desks. The defining characteristic is that the trade is large enough to cause significant market impact if executed on a public exchange. See also: RFQ execution.

Software tools that analyse on-chain transaction data to assess the risk profile of wallet addresses and transaction flows. OTC desks use blockchain analytics to screen counterparty wallets for exposure to illicit activity, sanctions, or high-risk entities as part of AML compliance.

A specialist, relationship-driven OTC trading service characterised by named account managers, lower minimum trade sizes, personalised pricing, and bespoke settlement arrangements. Boutique desks serve a narrower institutional client base with higher service quality than large exchange-run OTC operations.

The process of verifying the identity and assessing the risk profile of a customer or counterparty before establishing a business relationship. Standard CDD covers entity verification, UBO identification, and purpose of the relationship. Enhanced Due Diligence (EDD) applies to higher-risk counterparties.

The risk that the other party to a bilateral trade will be unable or unwilling to fulfil their settlement obligations. In OTC trading, counterparty risk exists between the desk and the institutional client. Reputable OTC desks mitigate this via KYB onboarding, pre-approved credit limits, and settlement pre-funding requirements.

The management of digital asset holdings within a corporate finance function. Corporate treasuries use OTC desks for structured conversion of crypto holdings to fiat, stablecoin treasury management, and fiat-to-crypto conversion for treasury diversification. See: Exchange Capital Institutional.

The process of converting digital assets (cryptocurrency or stablecoins) into fiat currency. Institutional off-ramp via an OTC desk provides licensed, compliant conversion at institutional scale without market impact. Contrast with: crypto on-ramp (fiat to crypto).

Regulatory measures designed to prevent financial systems from being used to fund terrorist activities. OTC desks are required to maintain CTF controls including transaction monitoring, sanctions screening, and suspicious activity reporting. Typically implemented alongside AML as an AML/CTF programme.

A private trading venue where large institutional orders can be matched without public disclosure. OTC desks function similarly to dark pools in that they allow block trades to be executed privately, but the mechanism differs — OTC is bilateral between desk and counterparty, while dark pools aggregate multiple counterparties.

The hours during which an OTC desk is available to receive inquiries, issue quotes, and execute trades. Full-service institutional OTC desks provide 24/7 desk coverage to accommodate global institutional counterparties across all time zones.

A broadly defined category encompassing cryptocurrencies, utility tokens, stablecoins, security tokens, and other blockchain-based instruments. In institutional OTC contexts, the term typically refers to Bitcoin, Ethereum, major altcoins, and leading stablecoins (USDT, USDC) as the primary traded instruments.

An elevated level of customer due diligence applied to higher-risk counterparties, such as those from high-risk jurisdictions, with PEP connections, or with complex ownership structures. EDD involves additional verification steps, more detailed source of funds investigation, and senior management approval.

A firm price issued by an OTC desk that the counterparty can immediately accept to execute a trade at that exact price. Unlike indicative quotes (which may change), executable quotes are binding on the desk for the full validity window. Exchange Capital's RFQ platform issues executable quotes sub-second.

The inter-governmental body that sets international standards for AML/CTF compliance. FATF Recommendations are the global benchmark for financial crime prevention. OTC desks in compliant jurisdictions align their programmes to FATF standards, including Recommendation 15 on virtual assets.

A FATF Recommendation (R.16) requiring virtual asset service providers to collect and transmit originator and beneficiary information when transferring virtual assets above a defined threshold. OTC desks must comply with Travel Rule requirements in applicable jurisdictions when settling digital asset transactions.

A price at which a trading desk commits to execute a trade for a specified size and within a specified validity window. A firm quote differs from an indicative quote, which may be revised. See: executable quote.

The practice of detecting a large incoming order and positioning ahead of it to profit from the anticipated price movement it will cause. Front-running is structurally possible on public exchange order books but eliminated in bilateral OTC execution, where trade intent is never disclosed to the market.

A trade execution model involving direct engagement between the counterparty and a named trader or relationship manager. High-touch execution is used for complex, large, or structured trades that require judgement, negotiation, or bespoke settlement arrangements. Contrast with: automated RFQ execution.

A non-binding price indication provided by an OTC desk to give a counterparty a general sense of market levels. Indicative quotes may not be executed at the stated price and should be contrasted with firm, executable quotes from Exchange Capital's RFQ platform.

A legal entity — such as a fund, company, exchange, or financial institution — that trades on a professional basis. Institutional counterparties are distinguished from retail clients by their knowledge, resources, and regulatory classification. OTC desks require institutional status for access to their services.

The corporate-level due diligence process applied to institutional counterparties. KYB covers verification of the legal entity, corporate structure, ultimate beneficial owners, regulatory licences, and source of funds. KYB is distinct from KYC, which applies to the individuals within the entity. See: AML Policy.

The individual-level identity verification process applied to directors, beneficial owners, and authorised representatives of an institutional counterparty. KYC involves government-issued ID verification, proof of address, and screening against sanctions and PEP databases.

A controversial practice in some electronic trading where the quote provider can cancel or revise a quote after the counterparty has accepted it — before execution is confirmed. Exchange Capital's RFQ platform does not use last-look: all accepted quotes execute at the stated price.

An entity that makes markets in digital assets by continuously offering to buy and sell. OTC desks source liquidity from their own book and from a network of liquidity providers to build the depth required to quote institutional-sized trades without significant market impact.

The adverse price effect caused by a large order consuming available liquidity on a public exchange order book. A large buy order drives prices up as it fills successive sell orders at progressively higher levels. OTC execution eliminates market impact by conducting the trade entirely away from the public book.

The bilateral legal agreement executed between Exchange Capital and an institutional counterparty as part of onboarding. The MTA governs the commercial terms of the trading relationship, including execution model, settlement arrangements, liability, and governing law.

The designated individual within a regulated firm responsible for receiving internal suspicious activity reports, making external SAR filings to financial intelligence units, and overseeing the AML/CTF compliance programme.

A settlement arrangement where multiple transactions between the same counterparties are aggregated and netted against each other, with only the net position delivered at settlement. Reduces the number of individual asset transfers and settlement costs for high-frequency institutional flow.

Trading conducted directly between two parties outside of a centralised exchange. OTC transactions are private, bilateral, and negotiated directly. The term originates from traditional finance and has been adopted in crypto to describe the institutional trading infrastructure that operates parallel to public exchanges.

An institutional trading service providing private, bilateral execution for large digital asset transactions. OTC desks act as principal, sourcing liquidity and issuing firm quotes for institutional-sized trades. See: What is an OTC crypto desk?

The public record of all outstanding buy and sell orders on a centralised exchange. Large orders placed on an order book are visible to all market participants and subject to market impact, slippage, and front-running. OTC execution bypasses the order book entirely.

A current or former senior political figure, government official, judicial officer, military officer, or senior executive of a state-owned enterprise, along with their immediate family members and known close associates. OTC desks apply enhanced due diligence to counterparties with PEP connections and require senior management approval for such relationships.

Documentation issued following trade execution confirming all trade details including asset, quantity, price, settlement details, timestamp, and reference numbers. Post-trade reports are used for accounting, compliance, and reconciliation by institutional counterparties.

An execution model where the OTC desk takes the position on its own book, acting as counterparty to the trade. The desk earns the bid-offer spread as compensation. Exchange Capital operates as principal. Contrast with: agency execution.

A named professional assigned to an institutional counterparty at a boutique OTC desk. The RM manages all aspects of the trading relationship from initial onboarding through day-to-day execution and settlement support. Available 24/7 at Exchange Capital.

The standard pricing mechanism used by institutional OTC desks. The counterparty submits a trade specification (asset, size, direction) and receives a firm, executable price from the desk within a defined timeframe. Exchange Capital's RFQ platform delivers sub-second firm quotes via web portal or API.

A technology platform enabling automated Request-for-Quote execution via web interface or API. Institutional counterparties can request quotes, review pricing, and execute trades programmatically. Designed for speed, operational integration, and high-frequency institutional flow.

A mandatory regulatory report filed by a financial institution or VASP when they know or suspect that a transaction involves proceeds of crime, terrorist financing, or other financial crime. Regulated OTC desks have a legal obligation to file SARs and are prohibited from disclosing to the counterparty that a report has been made.

The delivery of assets — digital or fiat — following trade execution. Settlement completes the trade by transferring ownership of the agreed assets between counterparties. See: T+0 settlement, T+1 settlement, Exchange Capital Settlement.

The licensed payment and blockchain infrastructure used to move assets between counterparties at settlement. OTC desks with proprietary settlement rails can offer faster, more flexible, and more geographically extensive settlement than desks relying solely on third-party infrastructure.

The difference between the expected execution price and the actual average fill price of a trade. Slippage increases with order size on public exchanges as the order consumes successive price levels. OTC execution with a firm quote eliminates slippage — the quoted price is the execution price, regardless of size.

The origin of the specific assets being traded or deposited. OTC desks require source of funds documentation as part of KYB/KYC to demonstrate that traded assets are derived from legitimate economic activity.

The broader economic activity that generated the overall wealth of a beneficial owner or entity. Distinct from source of funds. OTC desks apply source of wealth verification in enhanced due diligence contexts, particularly for high-value counterparties or those from higher-risk jurisdictions.

A digital asset designed to maintain a stable value, typically pegged 1:1 to a fiat currency such as the US Dollar. Major stablecoins include USDT (Tether) and USDC (Circle). Stablecoins are widely used in OTC settlement and as a bridge asset in crypto-to-fiat conversion workflows.

Settlement of a trade on the same calendar day as execution. T+0 is the fastest standard settlement cycle and is offered by Exchange Capital for digital asset legs via proprietary licensed infrastructure. T+0 minimises counterparty risk and maximises capital efficiency. See: Settlement & Rails.

Settlement of a trade on the next business day following execution. Many exchange-run OTC desks default to T+1 for digital asset settlement. T+1 introduces overnight counterparty exposure and reduces capital efficiency for high-frequency institutional flow.

A formal document or electronic notification issued immediately following trade execution confirming all agreed trade terms — asset, quantity, price, counterparty, settlement instructions, and reference numbers. Trade confirmations must be reviewed promptly and any discrepancies raised within the agreed dispute window.

See: FATF Travel Rule.

The natural person who ultimately owns or controls a legal entity. In KYB/KYC contexts, OTC desks are required to identify and verify all UBOs holding a defined ownership threshold (typically 25% or more). UBO verification is a core component of the AML compliance framework.

A FATF-defined category of entity that provides services involving virtual assets, including exchange, transfer, safekeeping, or administration. OTC desks are typically classified as VASPs and are subject to AML/CTF registration and compliance requirements in applicable jurisdictions. See: Exchange Capital AML Policy.

The time period during which an RFQ quote remains executable. Once a quote is issued, the counterparty must accept within the validity window for the trade to execute at the quoted price. Typical validity windows range from 10 to 30 seconds for automated RFQ execution.

The process of analysing a blockchain wallet address using analytics tools to assess its exposure to high-risk activity, illicit sources, or sanctioned entities. OTC desks are required to screen counterparty wallet addresses as part of AML compliance. All settlement wallets are screened by Exchange Capital prior to and during the trading relationship.

Large-volume digital asset trading conducted at the institutional or wholesale level — typically above retail minimums and within a B2B framework. Wholesale crypto trading is the primary market served by institutional OTC desks like Exchange Capital.