Over-the-counter options are not highly regulated. This is a key characteristic that distinguishes them from exchange-traded options. While OTC options are subject to some level of regulation, they are not as heavily regulated as their exchange-traded counterparts. This is primarily because OTC options are traded directly between two parties, without the involvement of an exchange or other intermediary. As a result, the parties involved in an OTC options trade have a greater degree of freedom to negotiate the terms of the deal. However, this lack of regulation also means that OTC options carry a higher level of risk, as there is no central clearing house to guarantee the performance of the contract. Since the 2007-2009 financial crisis, there have been efforts to increase the regulation of OTC markets, but they are still not considered to be highly regulated.

Choice A is incorrect. Large traders indeed trade over large sums of money in OTC options. This is because OTC options are not standardized and can be tailored to meet the specific needs of the parties involved, which often involves large amounts of capital.

Choice B is incorrect. OTC options are frequently used to hedge against interest rate risks and currency fluctuation risks. These types of risks can be significant for businesses and investors, and OTC options provide a flexible tool for managing these risks.

Choice C is incorrect. Participants do have the freedom to negotiate deals in OTC markets. Unlike exchange-traded options, which have standardized contracts with fixed terms, OTC options allow the parties involved to negotiate all aspects of the contract, including its size, expiration date, strike price, and other terms.