I think I get it. It's like I decided to trade bitcoins with you. I could transfer the coins to your address and you would transfer some fiat to me. We would agree on a price, that could be the market price or something completely different. Is that it?
It still puzzles me a bit, because I have no idea on how they are valuing bitcoin. It's like a complete different market apparently, and since they have a lot of money, I guess that a lot of bitcoins are being traded between them. Also, shouldn't they be regulated. I'm assuming those trades need to be registered, but since there is no one setting the price for BTC, since it's a free market, they could end up doing whatever they want. I things happen like this, I have no idea if this is good or bad for BTC, but it doesn't look that good.
Yep. Pretty much. The OTC broker is the middle man and acts as the facilitator and either the escrow, or thoroughly vets both parties.
The only way you can get an idea of price is by checking the exchanges, but of course it's totally up to the people doing the deal to decide the price they'll proceed on. It could be thousands less per coin for all we know. If that works for both then they'll go for it. No one else is going to know or care.
The big operations probably aren't subject to specific regulation for this space, but they often have parent companies who operate in fully regulated areas.
The only possible derogatory effect on Bitcoin is removing buying power from the open market, but it also removes selling so the effect is likely to be neutral.
