OTC trading provides flexibility in how financial instruments are traded, enabling buyers and sellers to negotiate terms directly. It is commonly used for securities that are not listed on formal exchanges, such as smaller stocks, bonds, or derivatives. OTC markets are less regulated than exchange-based markets, which can result in lower transparency but may also offer more customization and less price volatility. The OTC market is significant for liquidity in less-liquid securities and allows companies to raise capital outside traditional exchanges.