What is OTC trading
If a buyer and a seller execute a sales contract for a physical item, the seller hands the product over the counter to the buyer. This is the essence of "over the counter" or OTC trading. In power trading, no physical goods are exchanged, but the principle of a direct, over-the-counter trade for electricity is the same. These trades take place outside of power exchanges without intermediaries or clearing houses. In OTC trading, trading partners are in direct contact with each other or make use of a broker. The transactions themselves occur on trading platforms online or through brokerage companies. Agreements on trading volumes and pricing are reached individually and bilaterally among the parties, but contractual standards for simplification and risk mitigation are gaining acceptance. OTC trading is a common practice in the energy market, representing the largest volume of electricity market transactions in many countries. Conventionally-sourced power is more common for OTC trades than renewably-sourced electricity.