## What is the OTC Market? An Essential Investor's Guide

When we talk about financial trading, we often think of centralized exchanges like HOSE and HNX. But did you know? There is a vast and much more flexible trading ecosystem thriving — the **OTC Market (Over-the-counter Market)**. For those looking to expand their investment options, understanding what the OTC market is not only foundational knowledge but also the key to unlocking more opportunities.

### OTC: The Core Concept of Over-the-counter Trading

**OTC** stands for "Over-the-counter," known in Chinese as "场外交易市场" (Off-exchange Trading Market). The name itself reveals its operational essence: OTC is a decentralized trading ecosystem where prices are primarily negotiated and agreed upon by buyers and sellers, rather than relying on a centralized trading platform’s uniform pricing mechanism.

In Vietnam, the OTC market is also called other names — online market, free securities market, electronic quotation market, etc. Interestingly, OTC trading is not location-dependent; it can be conducted at securities firms, bank counters, or through phone, email, and online platforms, offering unprecedented flexibility for participants.

Unlike traditional exchanges, the OTC market is driven by a network of brokers, investors, information systems, and community forums. Participants can directly negotiate asset prices and trade through securities firms or bank counters. Originally, this mode was an auxiliary market, but today it has evolved into a complex, professional, and advanced market ecosystem.

### OTC vs. Centralized Exchanges: Key Differences

To help investors make more informed choices, let’s look at the key differences between the OTC market and traditional exchanges (HOSE, HNX):

| Comparison Dimension | OTC Market | Centralized Exchanges (HOSE, HNX) |
|--------|--------|----------------------|
| **Market Characteristics** | Decentralized, traded via broker networks | Centralized platform, under strict regulation and transparency management |
| **Pricing Method** | Determined by market makers and brokers | Determined by the exchange system |
| **Trading Hours** | 24/7, flexible and convenient | Fixed hours: HOSE from 9:00-14:45 (Monday to Friday); HNX from 9:00-15:00 (Monday to Friday) |
| **Product Range** | Unlisted stocks, diversified financial products (over 300 options) | Listed stocks, stock index futures, limited product types |
| **Contract Flexibility** | Customizable contracts based on demand | Standardized contracts, non-modifiable |
| **Payment Methods** | Highly flexible | Relatively limited |
| **Settlement Cycle** | Up to T+0 (same-day settlement) | Standard T+2 settlement cycle |

### Why Does the OTC Market Attract Investors?

**① Unlimited Investment Choices**

The OTC market opens a door for investors to diversify their investments. In Vietnam’s traditional markets, options are limited — stocks or VN30 index futures. But in the OTC ecosystem, you can access derivatives, CFDs, options, and more, helping you build a more diversified portfolio.

**② Booming Derivatives Market**

Take Bitcoin as an example. Since the launch of derivative products in 2017, these derivatives have accounted for over 30% of Bitcoin’s total market value. According to CryptoCompare, the comparison between Bitcoin spot trading volume and derivatives trading volume shows that derivatives even surpassed spot trading volume in June 2021. This clearly demonstrates the importance and liquidity of derivatives in the OTC market.

**③ Enhanced Security and Professionalism**

Modern OTC markets have been optimized, automated, and secured with multi-layer encryption, matching the security levels of centralized markets. Many OTC brokers are certified and regulated by authoritative financial institutions, further boosting market participants’ confidence.

**④ Power of Leverage Tools**

In traditional exchanges (like HOSE and HNX), investors can only access up to 2x leverage, and some platforms do not support leverage for unlisted stocks at all. In contrast, OTC markets allow investors to use leverage up to hundreds of times to amplify returns, which is a huge advantage for traders with limited capital but seeking maximum gains.

### The Current State and Opportunities of Vietnam’s OTC Market

According to the General Statistics Office of Vietnam, by the end of 2020, there were approximately 683,600 active enterprises in Vietnam. However, only about 1,575 of these companies had stocks listed on the three major exchanges — HOSE, HNX, and Upcom — accounting for less than 0.2%.

This data exposes a key opportunity: the vast majority of companies cannot raise capital through centralized exchanges but still need funding. The OTC market thus becomes a lifeline for these enterprises — providing a financing channel without the strict requirements of formal exchanges.

In Vietnam, several well-known OTC trading platforms include SanOTC, VN-Direct, and Vietstock, offering rich local OTC stock information and stable trading environments. However, these platforms mainly focus on domestic OTC stocks and lack international product diversity. For investors wishing to trade international OTC stocks, leverage Bitcoin trading, or access global assets, choosing brokers with international licenses becomes even more necessary.

### Risk Management Tips for OTC Investment

Investing in any financial market requires caution. Here are some expert tips to help you trade more safely in the OTC market:

**✔️ Avoid Low Liquidity Assets**

Stocks with low trading volume face liquidity risks — you may not find counterparties, leading to funds being stuck. This is a common trap in OTC markets and requires special vigilance.

**✔️ Build a Diversified Portfolio**

Don’t put all your funds into a single asset. Diversifying across different asset classes and markets can effectively reduce systemic risk. This principle applies to any market.

**✔️ Use Leverage Rationally**

While high leverage in OTC can quickly increase profits, it’s also a double-edged sword — potentially leading to account liquidation. Leverage should be used based on your market understanding; over-leverage is often a main cause of failure.

**✔️ Study Products Thoroughly**

Before trading any OTC product, ensure you fully understand its features, risks, and market dynamics. Lack of knowledge is a fundamental cause of investment failure.

### Summary

The core answer to **otc market là gì** is: an investment ecosystem full of opportunities but also requiring caution. For Vietnamese investors, the OTC market opens the door to the global financial markets, offering more products, greater flexibility, and higher leverage than traditional exchanges.

But opportunities always come with risks. To succeed in the OTC market, you need to deeply understand market mechanisms, choose trustworthy trading platforms, manage risks rationally, and continuously improve your trading skills and market knowledge.