Exchange trading vs over the counter trading
From VersusWiki
[edit] Comparison of Exchange Trading and Over the Counter (OTC) Trading
Over the counter trading is trading that is directly between two parties. Exchange trading is trading that is done through trading facilities known as exchanges. When trading via exchanges, contracts may change hands many times before final delivery of goods. Buyers and sellers usually will never meet each other. The exchange may not even connect buyers and sellers until delivery time. An over the counter trade, however, is directly between a buyer and seller. Over the counter trades have high counter party risk, risk that the other party will not be able to deliver their part of the contract. Exchanges, on the other hand, virtually eliminate this risk by requiring traders to post margins and by closing out positions daily. Exchanges also make rules about trading and standardize contracts.
