What Role Do Brokers Play in Facilitating OTC Derivative Trades?

In OTC derivative trades, brokers act as intermediaries or arrangers, connecting parties with opposing interests who may not be able to find each other easily. They do not typically become a party to the trade itself but rather facilitate price discovery and negotiation.

Brokers provide market expertise, access to a network of potential counterparties, and ensure that the terms of the deal are clearly defined. For their service, they earn a commission or fee, adding a layer of efficiency and information flow to an otherwise fragmented market.