Some financial or commodities instruments are traded on established exchanges. Examples include most highly-capitalized stocks, which trade on exchanges such as the New York Stock Exchange, and futures, which trade on futures exchanges such as the Chicago Board of Trade. These instruments are called exchange traded. An instrument is traded over-the-counter (OTC) if it trades in some context other than a formal exchange. Most debt instruments are traded OTC with investment banks making markets in specific issues. If someone wants to buy or sell a bond, they call the bank that makes a market in that bond and ask for quotes. Many derivative instruments, including forwards, swaps and most exotic derivatives are also traded OTC. In these markets, large financial institutions serve as derivatives dealers, customizing derivatives for the needs of clients.
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