Exchange traded Market Vs Over the counter (OTC) Market

Exchange-traded markets: 

Exchange-traded markets are the one in which all transactions are routed through a central source. In other words, one party is responsible for being the intermediary that connects buyers and sellers. The downside of this is that it gives the intermediary immense power in shaping the market. The upside is that it allows for better enforcement of transactions and security measures; for instance, exchange-traded markets can standardize products, and can ensure that payments and goods are delivered in accordance with the terms of the trade. Stock exchanges like the National Stock Exchange of India (NSE), Bombay Stock Exchange of India (BSE), New York Stock Exchange (NYSE) are all examples of exchange-traded market.

Over-the-counter markets: 

Unlike Exchange-traded markets, over-the-counter (OTC) markets are largely decentralized. There are multiple intermediaries that compete to connect buyers and sellers. The upside of this is that competition to be the intermediary ensures that transaction cost -- the cost imposed by the intermediary to execute the trade -- is lower. The downside is that the market can be more unregulated, and more prone to intermediaries with dishonest and fraudulent practices. The Forex market, as well as many markets for buying and selling Debt, are OTC markets.

With the rise of electronic trading and the growth of alternative investing, over-the-counter markets have surpassed exchange-based markets in daily trading volume. Their growth continues to rise.

Exchange Traded Market	Over the Counter Market
Traded in an organized centralized exchange	Privately negotiated and have no centralized trading facility
Exchange is the counter party to all the trades	The parties involved in negotiations or the trading firms are the counter parties.
Highly regulated and hence less counter party risk	Unregulated and involves substantial counter party risk
Exchanges involves less price competition and hence higher transaction execution cost for the trading	OTC promotes heavy competition between counter parties and hence lower transaction execution costs.
Some financial and commodities instruments are traded on established exchanges. Examples include most highly-capitalized Stocks.	An instrument is traded Over the Counter(OTC) if it trades in some context other than a formal exchange. Forex and most debt instruments are traded OTC with intermediate and investment banks making markets in specific issues.

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