What is an OTC Market?
Part 8/15: A Beginner’s Guide to Investing in Treasury Bonds & Bills
An Over-the-Counter (OTC) market is a decentralized marketplace where financial assets—like bonds, stocks, currencies, commodities and derivatives—are traded directly between buyers and sellers, rather than on a formal exchange like a stock market.
The opposite of an OTC (Over-The-Counter) market is an Exchange-Traded Market, also known as a formal exchange or organized exchange.
In Uganda, the OTC market is essential for trading government bonds after they’ve been issued at auction. This allows investors to buy and sell bonds freely without waiting for another auction.
Why Do We Need OTC Markets?
More flexibility – Unlike stock exchanges with strict trading hours, OTC markets operate with fewer restrictions and allow direct negotiations.
More liquidity – Investors can exit or enter trades at any time rather than holding bonds or securities until maturity.
Better access for investors – Small institutions, individuals, and offshore investors can easily trade without being restricted to formal exchanges.
Examples of Global OTC Markets
U.S. Treasury Market – One of the largest OTC markets in the world, where U.S. government bonds are actively traded - Average Daily Trading Volume: Approximately $900 billion in transactions per day, with peak days reaching around $1.5 trillion.
Forex Market – The global currency market is entirely OTC, with trillions of dollars traded daily - Average Daily Trading Volume: Approximately $7.5 trillion as of April 2022.
Nasdaq OTC Markets (OTC Pink, OTCQB, OTCQX) – Where small-cap stocks and private securities trade outside formal stock exchanges - Number of Securities Traded: Over 12,000 U.S. and global securities are traded across these markets.
How OTC Markets Have Grown
Digital platforms like Impala Market have improved access, making it easier for individuals and businesses to trade in bonds and other assets.
Increased investor participation has driven liquidity and innovation, making OTC markets a critical part of global finance.
Impala Market is leading the way in Uganda, providing a transparent OTC bond trading platform where buyers and sellers can view trades, express interest, and close deals faster.
This is part of the series A Beginner’s Guide to Investing in Treasury Bills and Bonds.
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