Hey Just wondered if anyone out there is trading an OTC market apart from FX? I am always interested in learning about new markets, it would be great if anyone could share their experience. Thanks endicott
I am trying to find markets where the bid/ask is sizeable and it's less competitive. I am guessing the barriers to entry are going to be high in these markets. Perhaps OTC options.
Legal docs are a big part of trading OTC, at least at an institutional level. Lots of criteria about collaterals as well. Define “less competitive” as it applies to you. What are you hoping to achieve?
I was hoping for someone to share their experience of trading OTC markets. My understanding is that these markets are less liquid and therefore the price maker can potentially make a profit by handling the customers specific requirements.
To some extent, but these sorts of Wild West days are mostly behind us... Used to be a "license to kill" back in the day, but even that is fraught with lawsuits, years later. There really mostly is no free lunch, especially now... Maybe in some cross-asset exotics...
It's still kind of the case in things like uranium, shipping, NOx allowances... More that you can get significant brokerage commission for brokering, but you've got to add real value as a broker which means a lot of hustle on your part. I know guys with high school degrees easily making 7 figures doing this, but they're all unique individuals who have found their niche, definitely not something anyone can do. Takes a combination of sales skill plus high EQ plus high IQ.
thanks for posting that's interesting. So are these types of markets limited to broking (is that a word?) for a customer. I was thinking about power and energy markets. I certainly don't want to get involved 'pitching' trades to anyone.
Power is its own very complicated animal with huge collateral requirements that make it a nonstarter for someone with less than $1M to trade. Even if you have the money learning what you're doing is nontrivial. Brokering is less pitching and more knowing your market and all the players intimately all the time. i.e. you know that buyer x is in the market for y at around price z, so when a seller mentions they might have some of y coming available you act as matchmaker and set up the deal, maybe getting 2-5% of the deal as commission. Given these are mostly natural buyers and sellers doing large deals, the commission adds up fast. Look at companies like Marex Spectron, Cantor's brokered markets, Evolution Markets....