Their bespoke nature imparts flexibility to cater to specific requirements of any market participant. Further, the OTC market acts as a nursery for new products and has remained the major source of product innovation.
Again, in a market that is essentially wholesale in nature and confined to a few large participants, an OTC trade may offer cost /price advantage in comparison with its exchange traded alternative. As we know, standardising products is a pre-requisite for moving them to exchanges and this can pose challenges. If not carefully orchestrated the exchanges themselves can pose vulnerabilities and systemic challenges.