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Glite Dictionary
over-the-counter derivative

over-the-counter derivative

1 9.9
A private financial contract made between two parties, not traded on a public exchange
  • noun
  • /ˈoʊvər ðə ˈkaʊntər dɪˈrɪvətɪv/
  • Specialized
translation icon : derivado extrabursátil
  • The problem is insolvency and the fear of insolvency, aggravated by the secrecy of the over-the-counter derivatives market.
  • over-the-counter derivatives market

Examples

  • Research and advisory firm TABB Group estimates the top 20 dealers generate around $40 billion annually from over-the-counter derivatives, excluding credit default swaps.

    Blog text (3)

  • The President's Working Group on Financial Markets, led by Summers and Federal Reserve Chairman Alan Greenspan, wrote to Congress that it "strongly supports" the bill, which would maintain the U.S. "competitive position in the over-the-counter derivative markets by providing legal certainty and promoting innovation, transparency, and efficiency in our financial markets."

    Academic text (2010)

  • DTCC, through its subsidiaries, provides clearing, settlement, and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments, and over-the-counter derivatives.

    Blog text (5)

  • Many investors prefer trading over-the-counter derivatives because of the flexibility and customization they offer compared to traditional exchange-traded instruments.

  • The over-the-counter derivatives market allows parties to negotiate terms directly, which can lead to more tailored financial arrangements.

  • Regulators are concerned about the risks associated with over-the-counter derivatives, as these contracts are often not transparent and can complicate risk management.

Synonyms

OTC derivative
vsover-the-counter derivative
  • Specialized
1 9.9

A financial contract privately negotiated and traded between two parties, not on an exchange

is the full written phrase rather than the shortened abbreviation

Surface Forms

over-the-counter derivative singular
over-the-counter derivatives plural

Morphology

over-the-counter + derivative

While 'derivative' is compositional (an instrument whose value derives from an underlying asset), the modifier 'over-the-counter' is a lexicalized, technical phrase whose financial sense ('traded privately between parties rather than on an exchange') is not transparent from the individual words 'over' + 'the' + 'counter' for an average B1 learner. Because understanding the full meaning requires knowledge of this specialized idiom or domain knowledge, the MWE is only partially predictable from its parts.

Etymology

The term over-the-counter derivative comes from the image of buying 'over the counter' in a shop, where you deal directly with the seller, and derivative means a product whose value comes from something else. So it describes a financial contract made privately between two parties 'not on a public exchange'.