How do over-the-counter bonds and exchange-traded bonds differ?

Exchange-traded bonds are listed on the exchange, and their prices are determined by quotes, whereas for over-the-counter (OTC) bonds the securities firm acts as the counterparty and quotes a price that reflects its funding costs and other factors.

As a result, OTC prices for the same bond may differ from firm to firm, and you can sometimes buy at a lower price on the exchange. However, exchange-traded bonds may be hard to trade when you want if there are not enough quotes.