Discuss the economic incentive
As we all know, the oil industry today is more sophisticatedthan ever, thanks to the sanctions and a complex governance,petrodollars and many more. To leverage on all aspects, includingeconomic incentives, vertical integration is preferred. In general,vertical integration is associated with gaining more market powerand oil industry is no exception to this: that is promotion ofimperfect competition in the market. Studies suggest that due tothis activity in oil industry, it is able to regulate theperformance efficiency of those small companies with excessiveprofits. Typical examples are that of the companies in thegulf.
Now let’s look at the differences between exchanges and OTC.
- OTC means the Over The Counter, i.e. deals with shares,equities and derivatives. Whereas exchange market is a platformwhere the currencies are traded. Multiple currencies are tradedwith each other.
- OTC is decentralized, meanig there are a lot of mediators inthe transaction, as against exchange market which is completelycentralized meaning transactions are carried out throughcentralized source.
- OTC is standardized, that is there is a regulatory body whichoverlooks of the consumer rights. In exchange markets there is nospecific agreement for this purpose.
- In OTC market, all the terms and conditions associated with atransaction involves only the parties involved unlike the exchangemarket, which is very transparent and the prices of currencies arehighly visible.
Hope this helps. Do hit the thumbs up. Cheers!