Over-the-Counter (OTC) Market Size, Share, Growth, Report 2025 to 2034

Over-the-Counter (OTC) Market Growth Factors 2025 to 2034

The global over-the-counter (OTC) market is expected to grow steadily at a CAGR of 7.3% from 2025 to 2034, with notional outstanding volumes projected to surpass USD 750–800 trillion by the end of 2025. This growth is driven by increasing demand for hedging instruments such as interest rate swaps, foreign exchange forwards, and credit default swaps, particularly as businesses and investors navigate volatile macroeconomic conditions, fluctuating interest rates, and currency risks. Regulatory reforms such as Dodd-Frank and EMIR have increased transparency and centralized clearing for many OTC derivatives, which has improved confidence and liquidity in the market, encouraging broader participation by institutional investors. The expansion of electronic trading platforms and swap execution facilities (SEFs) has also enhanced efficiency and reduced operational friction, further fueling market activity.

Key growth drivers include globalization of trade and finance, the rising complexity of risk management needs among corporates, and the increased use of derivatives for portfolio diversification. Emerging markets are becoming more significant contributors as financial institutions and corporations in Asia-Pacific and Latin America expand their use of OTC derivatives for hedging currency, interest rate, and commodity exposures. In addition, technological advancements such as algorithmic trading, real-time data analytics, and blockchain-based settlement solutions are expected to enhance market accessibility and reduce counterparty risk, supporting long-term growth of the OTC market.

Over-the-Counter (OTC) Market Report Highlights

• By Region, North America dominated the OTC Market, driven by advanced financial infrastructure, technological innovation in trading platforms, and the presence of major global banks like JPMorgan and Goldman Sachs.
• By Region, Asia-Pacific emerged as the fastest-growing region in the OTC market, supported by regulatory reforms, increasing institutional participation, and expansion in financial hubs such as Tokyo, Singapore, China, and India.
• By Instrument Type, the derivatives segment held the largest market share, led by interest rate swaps, FX derivatives, and credit derivatives due to high demand for hedging and risk management solutions.
• By Instrument Type, the commodities segment showed the fastest growth, fueled by rising energy and metal price volatility and increasing adoption of hedging tools by corporates and financial institutions.
• By Market Structure, the dealer market remained dominant, with market makers providing liquidity and enabling efficient execution of large or customized trades.

What is the Over-the-Counter (OTC) Market?

The over-the-counter (OTC) market is a decentralized market where financial instruments such as stocks, bonds, currencies, and derivatives are traded directly between two parties rather than through a centralized exchange. Unlike exchange-traded markets, the OTC market operates through a network of dealers, brokers, and electronic platforms, allowing participants to negotiate terms such as price, quantity, and settlement directly. This market plays a crucial role in global finance by providing liquidity for instruments that are not listed on formal exchanges and by facilitating customized transactions that meet the specific needs of institutions, corporations, and investors.

The main benefits of the OTC market include flexibility, customization, and access to a wide range of instruments. OTC contracts can be tailored to match the exact requirements of the counterparties in terms of maturity, notional amount, and risk exposure—something that is often not possible with standardized exchange-traded products. It also allows companies to hedge specific risks, such as interest rate or currency fluctuations, more precisely. Additionally, OTC markets typically offer greater liquidity for certain securities (like bonds) and open investment opportunities for instruments that may not qualify for listing on major exchanges, thus supporting broader capital formation and risk management.

Over-the-Counter (OTC) Market Recent Trends

1. Continued Growth in Notional Outstanding

• The worldwide OTC market has experienced steady growth over time. By mid-2024, for example, the notional outstanding of OTC derivatives had increased to approximately USD 729.8 trillion, which was about 2.4% higher than at mid-2023. This increase was primarily due to demand for hedging instruments such as interest rate swaps and foreign exchange derivatives. To illustrate, in the first half of 2024, the notional value of foreign exchange (FX) swaps and forwards again experienced notable increases, especially for contracts in Japanese yen, which grew 13% y/y in dollar terms, and a whopping 26% in yen terms. This emphasizes growing reliance on OTC derivatives to mitigate currency and interest rate risks.

2. Shift Towards Centralized Clearing

• The central clearing of OTC derivatives has experienced significant growth. For example, Eurex Clearing announced a 12% year-over-year increase in cleared OTC notional volumes in 2024, reaching EUR 33,411 billion. This trend is the result of a push for greater market transparency and lower counterparty risk. Central clearing is defined as clearing trades through the use of central counterparties (CCPs). Central clearing helps reduce the risk of a default by either party and improves the integrity of the financial system. The growing number of trades through CCPs suggest a tendency towards more standardized and safer trading practices in the OTC markets.

3. Regulatory Enhancements and Oversight

• Regulators across the globe are taking steps to tighten oversight in the OTC market. For example, in India, the Securities and Exchange Board of India (SEBI) issued changes to the regulations in 2025 to improve oversight in the equity derivatives market, including a new method for calculating open interest and increased position limits. These changes were aimed at reducing systemic risk, increasing stability in the market, enhancing transparency, and reducing opportunities for abuse and manipulation. These regulatory enhancements appear to be part of a wider global theme towards tightening oversight in OTC markets to maintain integrity and keep markets resilient.

4. Technological Advancements and Automation

• The adoption of technology in the OTC market is rapidly increasing, with companies utilizing automation and algorithms for trading as efficiencies improve to manage a more sophisticated portfolio. The adoption of technology is impacting market structure and operational process. The utilization of technologies such as artificial intelligence, machine learning, and blockchain technology is improving OTC trade execution speed, accuracy, and security and is both increasing operational efficiencies and enhancing risk management and trading processes in the OTC market.

Report Scope

Over-the-Counter (OTC) Market Dynamics

Market Drivers

• Rising Demand for Hedging and Risk Management: Corporates, banks, and institutional investors increasingly rely on OTC derivatives such as interest rate swaps, FX forwards, and credit default swaps to manage currency, interest rate, and credit exposures. This is especially important in volatile markets, driving consistent growth in OTC volumes globally.
• Technological Advancements: Adoption of electronic trading platforms, algorithmic execution, and blockchain-based settlement solutions has enhanced efficiency, reduced operational risks, and improved transparency. These tools also allow faster trade execution and better portfolio monitoring, encouraging more participants to enter the OTC market.

Market Restraints

• High Counterparty Risk: Bilateral OTC contracts expose parties to default risk, particularly in uncollateralized or highly leveraged trades. Managing credit risk requires robust risk assessment and collateral frameworks, which can be resource-intensive.
• Regulatory Compliance Costs: Regulations such as Dodd-Frank (US), EMIR (EU), and similar rules globally require reporting, clearing, and capital allocation, increasing operational complexity and compliance costs for market participants.

Market Opportunities

• Expansion in Emerging Markets: Emerging economies in Asia-Pacific, Latin America, and Africa are adopting OTC derivatives to hedge currency, interest rate, and commodity risks. Growing trade volumes and financial market sophistication offer significant growth potential for OTC instruments.
• Innovation in Product Offerings: Market participants are developing new tailored products, including risk-free rate–linked derivatives, ESG-focused instruments, and bespoke contracts that meet the specific needs of corporates and institutional investors, creating new revenue streams.

Market Challenges

• Market Complexity and Transparency Issues: OTC instruments are often complex and not standardized, making pricing, valuation, and risk assessment more challenging. Lack of transparency in some segments can also reduce investor confidence.
• Volatility and Systemic Risk: Market shocks, interest rate fluctuations, or major counterparty defaults can amplify systemic risk. Ensuring market stability requires careful risk management, central clearing adoption, and regulatory oversight.

Over-the-Counter (OTC) Market Regional Analysis

The OTC market is segmented into various regions, including North America, Europe, Asia-Pacific, and LAMEA. Here is a brief overview of each region:

North America: Technological Innovation and Market Expansion

North America continues to lead in OTC derivatives trading, with the U.S. accounting for a significant portion of global activity. In 2024, the region saw notable advancements in market infrastructure and product offerings. For instance, the launch of the FMX Futures Exchange in September 2024 introduced a competitive alternative to established players like CME Group. FMX offers a combined platform for futures, repos, and foreign exchange trades, leveraging advanced trading technology to attract market participants. This move underscores the region's commitment to enhancing market efficiency and providing diverse trading options.

Asia-Pacific (APAC): Regulatory Reforms and Market Growth

The APAC region is experiencing rapid growth in OTC derivatives trading, driven by regulatory reforms and increasing market participation. In 2024, Japan's derivatives market was set for expansion, with Tokyo and Singapore emerging as top locations for derivatives trading over the next three to five years. This trend reflects the region's evolving financial landscape and the growing sophistication of its markets. Additionally, mandatory reporting of OTC derivatives transactions, introduced as part of G20 reforms, has been a key focus in countries like Japan, Australia, Singapore, and Hong Kong, aiming to enhance transparency and reduce systemic risks.

Europe: Market Consolidation and Regulatory Challenges

Europe's OTC market is undergoing significant changes, characterized by market consolidation and evolving regulatory challenges. In 2024, the European Energy Exchange (EEX) experienced a substantial increase in trading volumes, driven by new members and a shift from OTC trading to the exchange. This transition reflects the industry's response to heightened volatility in energy markets and the need for more transparent and efficient trading platforms. However, the European Banking Authority (EBA) highlighted the dominance of non-EU banks, particularly U.S. institutions, in key segments of the European derivatives market, raising concerns about financial autonomy and the need for strategic adjustments.

Latin America, Middle East & Africa (LAMEA): Emerging Markets and Strategic Developments

The LAMEA region is witnessing gradual growth in OTC derivatives trading, with emerging markets playing a pivotal role in this expansion. In 2024, the region's financial markets experienced increased activity, driven by rising demand for hedging instruments and greater integration into the global financial system. Strategic developments, such as the establishment of new trading platforms and the implementation of regulatory reforms, are contributing to the maturation of OTC markets in countries across Latin America, the Middle East, and Africa. These efforts aim to enhance market transparency, attract foreign investment, and foster economic stability in the region.

Over-the-Counter (OTC) Market Segmental Analysis

The OTC market is segmented into capacity, application, chemistry, end-user, and region. 

Instrument Type Analysis

Derivatives: OTC derivatives, including interest rate swaps, FX forwards, and credit default swaps, dominate the OTC market in terms of notional outstanding. Interest rate derivatives alone account for the largest share of global OTC exposure, reflecting their critical role in hedging against interest rate and currency risks.

Commodities: Commodity derivatives, particularly energy and metal contracts, are the fastest-growing segment. Increasing volatility in oil, gas, and precious metals, along with rising demand for hedging commodity price risk in emerging markets, has driven rapid expansion in OTC commodity trading.

Market Structure Analysis

Dealer Market: The dealer market remains the largest structure in OTC trading. Market makers provide continuous bid/ask quotes and liquidity for a wide variety of instruments, enabling efficient execution of large or customized trades between institutional participants.

Direct Negotiation: Bilateral, directly negotiated OTC contracts are growing quickly, especially in emerging markets and bespoke derivatives. This segment benefits from flexibility, allowing participants to tailor contract terms such as maturity, notional size, and settlement method according to specific risk-management needs.

Participant Type Analysis

Institutional Investors: Institutional investors, including hedge funds, pension funds, and insurance companies, dominate OTC markets due to their high trading volumes and large-scale risk-management requirements. They are key drivers of liquidity and market depth.

Corporates/Banks: Corporates and banks are the fastest-growing segment in OTC participation, increasingly using derivatives to hedge operational and financial risks. Rising globalization, cross-border trade, and currency exposure are pushing more corporates to adopt OTC instruments for risk mitigation.

Over-the-Counter (OTC) Market Top Companies

• J.P. Morgan
• Goldman Sachs
• Citigroup
• Bank of America
• Morgan Stanley
• Deutsche Bank AG
• UBS Group AG
• Barclays PLC
• HSBC Holdings PLC
• BNP Paribas S.A.
• Société Générale S.A.
• Wells Fargo & Company
• Royal Bank of Canada
• Mizuho Financial Group
• Nomura Holdings, Inc.

The OTC market is predominantly controlled by a few large financial institutions, with U.S. banks holding a significant share in key segments. As of December 2023, U.S. banks accounted for nearly 28% of the European derivatives market, contributing to a total non-EU market share of 33.73% in that sector. This dominance is particularly evident in interest rate derivatives, commodity trading fees, and investment services. These institutions leverage their extensive global networks, advanced trading platforms, and comprehensive product offerings to maintain their competitive edge.

The competitive dynamics in the OTC market are also influenced by technological advancements and evolving regulatory frameworks. Market participants are increasingly adopting electronic trading platforms, algorithmic trading, and blockchain technology to enhance efficiency, reduce costs, and improve transparency. For instance, the launch of the FMX Futures Exchange in September 2024 introduced a combined platform for futures, repos, and foreign exchange trades, leveraging advanced trading technology to attract market participants. Additionally, regulatory bodies are implementing reforms to address emerging risks and ensure the resilience of the financial system, influencing market strategies and operations.

Perspectives of Top Financial Institutions on OTC Derivatives

• JPMorgan Chase & Co. (JPM): JPMorgan's wealth management division emphasizes the strategic use of derivatives, including OTC instruments, to enhance portfolio returns and manage risks. They highlight the flexibility of OTC derivatives in customizing contracts to meet specific client needs, particularly in volatile market conditions. This approach underscores the importance of OTC derivatives in sophisticated investment strategies.
• Goldman Sachs Group, Inc. (GS): Goldman Sachs has been actively involved in the OTC derivatives market, offering a range of customized solutions to institutional clients. The firm focuses on providing innovative risk management tools, including bespoke OTC derivatives, to help clients navigate complex financial landscapes and achieve their investment objectives.
• Citigroup Inc. (C): Citigroup has highlighted the significance of effective oversight in the OTC derivatives market. Kenneth Griffin, President and CEO of Citadel Investment Group, emphasized the importance of appropriate oversight to ensure the safety and soundness of the financial system, particularly in the context of OTC derivatives.
• StoneX Group Inc. (formerly INTL FCStone): StoneX, a Fortune 100 company, offers a comprehensive suite of OTC derivatives services, including trading, clearing, and risk management solutions. The company emphasizes the importance of OTC derivatives in managing commodity price volatility and enhancing liquidity for institutional clients.
• CME Group Inc.: CME Group, while primarily known for exchange-traded derivatives, also engages in OTC derivatives markets. The company has reported significant growth in trading volumes, particularly in interest rate products, highlighting the increasing demand for OTC derivatives as tools for hedging and speculation. 

Market Segmentation

By Instrument Type

• Equities (OTC Stocks)
• Fixed Income
• Derivatives
• Foreign Exchange (FX)
• Commodities
• Others

By Market Structure

• Dealer Market
• Brokered Market
• Direct Negotiation

By Participant Type

• Institutional Investors
• Retail Investors
• Market Makers/Dealers
• Corporates/Banks

By Region

• North America
• APAC
• Europe
• LAMEA