Equiteez OTC Markets

Equiteez’s over-the-counter (OTC) markets are vital for large-scale trades in illiquid markets. Unlike traditional order book exchanges, the OTC platform facilitates direct investor-to-investor transactions using smart contracts for escrow.

What is OTC Trading? OTC markets enable direct trades between two parties without affecting the broader market price. For example, if an investor wants to sell 10% of an asset's total supply, doing so on a regular exchange would significantly impact the price. OTC trading allows them to negotiate & trade directly with investors at an agreed-upon price.

Think of it as a VIP room next to a busy marketplace. While the main trading floor buzzes with infinite small transactions, the VIP room hosts larger, more discrete deals. Here, buyers and sellers can negotiate directly without their actions affecting the broader market price.

How It Works

Equiteez’s OTC market operates as digitally automated escrow services, powered by smart contracts. When a user wants to sell their tokens, they lock them in a smart contract and specify their desired currency & price. These contracts eliminate the need for traditional intermediaries while providing an increased level of security without counterparty risk.

When the seller places assets in the smart contract, they can only withdraw the funds when the sale is completed or they explicitly cancel their offer. Similarly, the buyer’s funds are only released to the seller when the tokens transfer successfully. This creates a secure environment where neither party needs to trust the other – they only need to trust the code.

This automated system prevents common issues in traditional OTC trading, such as counterparty risk or settlement failures. Every aspect of the trade – from order placement to final settlement – occurs securely on the blockchain, providing an immutable transaction record.

For example, if an investor wants to sell 10,000 tokens at $100 each, they place these tokens in the smart contract. The tokens remain locked until a buyer matches their price or the seller withdraws their offer. When a buyer commits to the purchase by sending the required funds, the smart contract automatically executes the exchange, ensuring both parties receive what they agreed upon.

Offer System

The OTC DEX also includes a sophisticated offer mechanism that allows users to negotiate prices and terms before committing to a purchase.

• Making Offers: Users can submit offers to buy tokens listed for sale at a custom price. The offer specifies the total price the buyer is willing to pay and the number of tokens they wish to acquire.

• Offer Acceptance: When an offer is accepted, the seller agrees to the specified price and token quantity. The buyer then deposits the agreed currency and the transaction proceeds.

• Offer Withdrawal: Users can cancel their offer at any time. If the offer is withdrawn, the platform ensures that the funds are returned to the buyer without incurring any additional fees.

• Offer Expiry: Offers can be set with an expiration time, after which they will automatically expire if not accepted.

Transaction Process

To ensure a secure trading environment, the OTC market operates as a non-custodial solution, meaning only the seller and buyer have access to their tokens in escrow until the offer is canceled or processed.

Note: Equiteez NEVER has access to any user funds.

• Listing Creation: When a user creates a listing, the total amount of tokens is transferred to the OTC market in smart contract escrow.

• Purchase: Upon purchase, the buyer sends the agreed-upon currency & amount, and the contract automatically deducts fees as the transaction occurs.

Fees

• Marketplace Fees: A small brokerage commission (e.g., 2%) is taken from the transaction value paid in the specified currency (e.g., USDT or RWA token,).

• Network Fees: This fee occurs whenever an action occurs on the Mavryk blockchain, and is not paid to Equiteez. It is important to note that on-chain actions, such as making or retracting an offer, will have a small network fee.

  • Seller: The seller receives the payment, minus marketplace fees deducted from the received funds

  • Buyer: The buyer receives the purchased RWA tokens, minus marketplace fees deducted from the received assets

For more on network transaction fees, please read more on Mavryk’s documentation here.

A Practical Example: Trading Tokenized Real Estate To understand better, consider these (non-exhaustive) examples of different scenarios in the OTC Marketplace.

Scenario 1: Trading Tokenized Real Estate

Listing:

• Bob lists 100 RWA hotel tokens for sale at $100 per token ($10,000 total).

Option A (Complete Sale):

• Alice deposits funds into the escrow contract and buys the full 100 tokens for $10,000.

• Transaction Structure:

  • Bob receives $9,800 (after a 2% marketplace fee)

  • Alice receives 98 RWA hotel tokens (after a 2% marketplace fee)

  • Result: The full OTC offer is executed seamlessly, with Bob receiving $9,800 and Alice receiving 98 RWA tokens. The full OTC transaction is now concluded.

Option B (Partial Sale):

• Alice deposits funds into the escrow contract and buys 50 tokens for $5,000.

• Transaction Structure:

  • Bob receives $4,900 (after a 2% marketplace fee)

  • Alice receives 49 RWA tokens (after a 2% marketplace fee)

  • Result: A partial OTC transaction occurs, and Bob still has 50 tokens available at $100 each.

Scenario 2: OTC Marketplace Offers

Listing:

• Bob lists 100 RWA hotel tokens for sale at $100 per token ($10,000 total).

Option A (Complete Offer, Buyer Rejects):

• Alice deposits funds into the escrow contract and offers $80 for all 100 tokens ($8,000 total).

• Bob rejects the offer.

• Result:

  • Bob’s tokens remain in escrow at the original asking price, awaiting a new buyer or sale cancellation.

  • Alice’s funds are unlocked and may be withdrawn.

  • The complete offer is rejected, leaving Bob’s tokens in escrow for another buyer while Alice’s funds are available for withdrawal.

Option B (Partial Offer, Buyer Accepts):

• Alice deposits funds into the escrow contract and offers $95 for 80 tokens ($7,600 total).

• Bob accepts the offer.

• Result:

  • Bob receives $7,448 (after a 2% marketplace fee).

  • Alice receives 78.4 RWA tokens (after a 2% marketplace fee).

  • The remainder of Bob’s sale offer remains available (20 tokens for $100 each).

  • The partial offer is successfully executed, with Bob receiving $7,448 and Alice receiving 78.4 RWA tokens. The remaining 20 tokens are still available for sale.

The above examples demonstrate how Equiteez’s OTC market facilitates full, flexible, and partial offers. The platform manages the escrow & fee processes transparently, ensuring both buyers and sellers can engage in transactions that meet their needs without having to worry about trusting the other party.

Why OTC Trading Matters Traditional exchanges work well for regular trading of liquid assets, but they face limitations when handling illiquid assets such as RWAs, which are natively illiquid. Imagine trying to market sell 50% of an RWA token's total supply on a regular exchange – the price would fall as the sale is being executed. With tokenized real world assets, the OTC Marketplace solves this by allowing investors to negotiate prices directly and execute trades without affecting the public market price.

The OTC market’s flexibility extends beyond just facilitating large trades. Sellers can specify which currencies they'll accept as payment (ex. Bitcoin), set expiration dates for their offers, and even allow partial fulfillment of large orders. This adaptability makes OTC trading valuable for various scenarios, from institutional investors making large purchases to early investors seeking to liquidate significant holdings.

Overall Impact On Market Dynamics

OTC trading significantly influences market dynamics, particularly for less liquid assets. By allowing large trades to occur off-exchange, it prevents volatile price swings that might otherwise destabilize markets. This stability benefits all market participants, not just those engaging in OTC trades.

More importantly, OTC trading helps determine fair prices for less frequently traded assets. When regular exchange prices might not reflect true market value due to low trading volumes, OTC trades can provide more accurate pricing based on actual negotiations between serious buyers and sellers.

Practical Consideration for Users

Remember that OTC trading isn't just for large institutional players. Anyone needing to execute trades that might be difficult on traditional exchanges can benefit from this system. The key is understanding when OTC trading provides advantages over regular exchange trading and how to use the platform effectively.

By providing a secure, efficient way to execute large trades and handle illiquid assets, OTC trading platforms have become an essential part of the RWA cryptocurrency ecosystem. As these platforms continue to evolve and improve, they'll likely play an increasingly important role in shaping how we trade digital assets in the future.