What are the risks of OTC Trading?

The OTC markets have improved significantly over the past few years. These improvements have led to better liquidity, as well as information for traders. Electronic quotations and trading have streamlined the OTC markets. Nevertheless there are a number of risks that may be less prevalent in formal exchanges. Firstly, regulations - OTC brokers and dealers are regulated by the FSCA, but exchanges are subject to more stringent regulation than OTC markets. Secondly, Transparency - OTC prices are not disclosed publicly. Trades which are made in the public arena might give investors added assurance and confidence in their transactions.