From Traderpedia

Definition: OTC is an abbreviation for over-the-counter.

An OTC instrument is basically any derivative that is traded off-exchange - ie: traded directly between two counterparties such as bank-to-bank or bucketshop-to-punter. OTC products are non-regulated instruments and includes primarily spot forex contracts, but many other markets are traded OTC including oil. Spreadbetting transactions and CFD's are also OTC products as clients trade non-exchange traded products directly with the market maker.