What are Over-The-Counter (OTC) Stocks?
Over the counter stocks are stocks which are traded outside major stock exchanges like NYSE and Nasdaq. The two major types of over the counter stocks are Pink Sheet securities and Over-The-Counter Bulletin Board (OTCBB) stocks.
The term over-the-counter means that the stocks are traded through dealer network, not through a centralized stock exchange. Mostly the stocks traded through over-the-counter are stocks of small companies, delisted companies or mysterious companies having no sound financial history. The instruments such as bonds are also traded over-the-counter as their moving usually requires a phone call.
Over-the-counter stock trades are done through direct interaction between broker-dealers either by phone or through computer networks. The trader must first open an account from a broker allowing OTC trades. When you place an order the broker contacts with an appropriate market maker. And after the process of bid and ask the money and stocks are exchanged. Today there are some companies, like NobleTrading, offering online OTC trading facility allowing traders to directly contact major market makers.
The term over-the-counter means that the stocks are traded through dealer network, not through a centralized stock exchange. Mostly the stocks traded through over-the-counter are stocks of small companies, delisted companies or mysterious companies having no sound financial history. The instruments such as bonds are also traded over-the-counter as their moving usually requires a phone call.
Over-the-counter stock trades are done through direct interaction between broker-dealers either by phone or through computer networks. The trader must first open an account from a broker allowing OTC trades. When you place an order the broker contacts with an appropriate market maker. And after the process of bid and ask the money and stocks are exchanged. Today there are some companies, like NobleTrading, offering online OTC trading facility allowing traders to directly contact major market makers.
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