What Is the OTC Market? All the Things Investors Need to Know

Many new investors beginning to explore the financial world are often only familiar with traditional exchanges like HOSE, HNX, or Upcom. However, outside of these exchanges, there exists another market with enormous potential but little public attention – the OTC market.

What Is OTC? Basic Concepts You Need to Know

What is OTC? OTC stands for “Over-the-counter” (, a decentralized trading method with pricing primarily determined through negotiation and mutual agreement between brokers and investors.

Unlike centralized exchanges, the OTC market does not operate at a fixed location. Instead, transactions occur through bank counters, securities firms, or online via phone, email, and digital platforms. OTC brokers negotiate asset prices among themselves and then execute trades, forming a flexible trading network.

Initially, OTC was considered a secondary market serving auxiliary transactions. Today, it has become a premium market, coordinated by professional brokers and operated on separate trading platforms.

Clear Distinction: OTC vs. Traditional Exchanges

To better understand the OTC market, let’s compare the different features of OTC and centralized exchanges )HOSE, HNX(:

Why Is the OTC Market Becoming More Attractive to Investors?

) Endless Opportunities

The OTC market opens up diverse investment possibilities that centralized exchanges do not offer. While Vietnamese investors on traditional platforms are limited to stocks or VN30 futures, OTC provides access to derivatives, CFDs, options, and many other tools, helping diversify portfolios.

Rapid Growth of Derivative Products

Derivative products on OTC not only complement but also surpass the spot market ###spot(. Take Bitcoin as an example, since 2017, Bitcoin derivatives have accounted for over 30% of the market value. Even in June 2021, derivative trading volume far exceeded spot trading volume, demonstrating the increasing appeal of these products.

) Continuous Security Enhancements

The OTC market today has been optimized and automated with multiple security layers comparable to the centralized market. Moreover, professional OTC brokers are authorized by reputable financial institutions, providing investors with greater peace of mind.

Leverage Amplifies Capital Power

On HOSE or HNX, investors are only granted a maximum leverage of 2x. Even Upcom stocks or unlisted stocks have no leverage at all. Conversely, OTC allows leverage up to hundreds of times, significantly amplifying profits.

The OTC Market in Vietnam – The Current Landscape

According to Vietnam’s General Statistics Office, by the end of 2020, about 683,600 enterprises were operating. However, only 1,575 enterprises ###0.2%( had their stocks traded on the three major exchanges: HOSE, HNX, and Upcom.

This figure shows why OTC has become a key gateway for companies to raise capital without meeting the stringent requirements of centralized exchanges. Although less vibrant than before, OTC stocks remain an attractive investment channel with high profit margins.

Domestic reputable OTC platforms and brokers include SanOTC, VN-Direct, Vietstock. These platforms provide diverse OTC information with stable operations, focusing on domestic stocks. However, to access international products or trade Bitcoin with leverage, investors need to seek licensed brokers.

Risks to Consider When Investing in OTC

Although OTC offers significant opportunities, investors should be aware of potential risks:

Liquidity Risk: Stocks with very low trading volume can cause “fund lock-up” issues. Investors may find it difficult to buy/sell when no counterparty is available, leading to inability to recover capital promptly.

Leverage Abuse: While high leverage is an advantage, it is a double-edged sword. If the market moves against your position, your account can be “liquidated” immediately. Using leverage should depend on thorough analysis and deep understanding of the products.

Concentration Risk: Putting all assets into a single asset class is a major mistake. Investors should diversify their capital across various assets to spread risk.

Tips for OTC Investors

To succeed in OTC trading, remember three golden principles:

First, avoid stocks with minimal trading volume to prevent liquidity issues.

Second, always diversify your portfolio. “Don’t put all your eggs in one basket” is a golden rule in investing.

Third, use leverage wisely. Price volatility on OTC can be very high, so consider carefully before applying high leverage.

What is the OTC market? It is a market of opportunities for investors willing to learn and manage risks scientifically.