Over-the-counter (OTC) refers to financial transactions that take place outside of traditional exchanges such as the New York Stock Exchange or NASDAQ. In the forex market, most trading is done over the counter. This means that currencies are not traded on a centralized exchange, but rather through a network of banks and dealers. This allows for greater flexibility and faster execution of trades, but also involves more counterparty risk as there is no centralized clearinghouse to guarantee the settlement of trades. OTC trades are often conducted through electronic trading platforms or by phone.