The trading of financial securities can take place Over The Counter (OTC), i.e. out of regulated stock exchanges, but only between professional investors, who should be fully aware of potential risks of their trading. OTC trading is not standardised (maturity, min-max quantity, payment method, termination) and the two parties should agree on all contractual terms for the transaction to be valid. After 1990 Alternative Trading Systems (ATS) offered by financial providers, like Reuters and Bloomberg, have taken the lead; in the ATS, the operator creates a page with all the details of the transaction. The pricing and details of this transaction can be seen by any other Reuter-Bloomberg user, who can underwrite the transaction and accept the conditions. After confirmation, the system sends a scheme with all contractual terms. Codes of conduct are widely used and describe the terms of OTC purchase, they originate from the navy and religious codes.
The volume of transactions on OTC markets is far bigger than that on exchange traded markets, thanks to the greater freedom left to the parties involved, that able to meet their special needs (see BIS statistics at http://www.bis.org/statistics/derstats.htm). The risks connected with such transactions seem to be not a direct source of losses.

Bibliography

HULL J. (2008) Options, futures and other derivatives, Prentice Hall.
OLDANI C. (2008) Governing Global Derivatives, Ashgate, London.

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