With the rapid development of financial markets, on-exchange transactions and over-the-counter transactions have become the focus of investors. So, what is the difference between on-exchange and over-the-counter transactions? What are their respective advantages and disadvantages? How to choose a trading method that suits you?
On-exchange trading
On-exchange trading, also known as exchange trading, refers to the purchase and sale of securities by both parties through the stock exchange. In on-exchange trading, the exchange acts as an intermediary to ensure that buyers and sellers follow rules and standard operations.
Advantages:
1. High information transparency: In on-site trading, all transaction information can be viewed directly, and the information transparency is high.
2. Strong risk control capabilities: The exchange conducts comprehensive supervision of listed companies and has a strict corresponding information disclosure system. Investors can obtain relevant information more quickly and reduce potential investment risks.
3. Standardized trading processes: On-site trading has unified trading rules, which greatly reduces the risks caused by unfamiliarity with the trading process between buyers and sellers in the exchange.
4. Strict discipline: The exchange implements stricter trading rules and supervision, and investors’ rights and interests are better protected.
5. High transaction efficiency: Transactions completed on the exchange are very fast, so investors can better control transaction risks.
Over-the-counter trading
Over-the-counter trading is also called over-the-counter trading or OTC trading. It refers to a way for various securities market traders and brokers to trade outside a centralized market through telephone and other electronic trading channels.
Advantages:
1. Greater market flexibility: OTC transactions can choose the counterparty and transaction price by themselves, and at the same time, they can enter and exit immediately based on current information.
2. Trading hours are more relaxed: There are no exchange opening and closing time restrictions for OTC trading.
3. Transaction objects are more diverse: Transaction objects in the market are more diverse, including hedge funds, securities companies and private equity financing.
4. Lower transaction fees: The costs incurred by OTC transactions are relatively low, allowing investors to obtain profits in a shorter time and lowering the investment threshold.
5. Investment strategies are closer to professionals: OTC trading is not subject to exchange supervision and control. Investors can adopt flexible investment strategies based on their own judgment and management, which is closer to professionals.
Whether it is on-exchange or over-the-counter trading, when choosing a transaction, you should formulate an investment strategy based on your own investment income goals, overall risk tolerance, personal investment experience, investment knowledge level and other factors. When making decisions, you should Act within your capabilities and avoid unnecessary losses caused by blind operations.