Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
What is 'Over-The-Counter - OTC' Trading?
#1
Over-the-counter (OTC) is a security traded in some context other than on a formal exchange such as the New York Stock Exchange (NYSE), Toronto Stock Exchange or the NYSE MKT, formerly known as the American Stock Exchange (AMEX). The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network as opposed to on a centralized exchange. It also refers to debt securities and other financial instruments, such as derivatives, which are traded through a dealer network.

BREAKING DOWN 'Over-The-Counter - OTC'

For many investors, there is little practical difference between OTC and major exchanges. Improvements in electronic quotation and trading have facilitated higher liquidity and better information. However, there are key differences between the transaction mediums. On an exchange, every party is exposed to offers by every other counterparty, which may not be the case in dealer networks. There is less transparency and less stringent regulation on these exchange," so unsophisticated investors take on additional risk and could be subject to adverse conditions.

Popular OTC Networks

The OTC Markets Group operates some of the most well-known networks, such as the OTCQX Best Market, the OTCQB Venture Market and the Pink Open Market. These markets include unlisted stocks that are known to trade on the Over the Counter Bulletin Board (OTCBB) or on the pink sheets. Although Nasdaq operates as a dealer network, Nasdaq stocks are generally not classified as OTC because the Nasdaq is considered a stock exchange. Conversely, OTCBB stocks are often either penny stocks or are offered by companies with bad credit records.

Securities on OTC Networks

Stocks are usually traded OTC because the company is small and cannot meet exchange listing requirements. Also known as unlisted stock, these securities are traded by broker-dealers who negotiate directly with one another over computer networks and by phone. The dealers act as market makers, and the OTC Bulletin Board is an inter-dealer quotation system that provides trading information.

American depository receipts, which represent shares in an equity that is traded on a foreign exchange, are often traded OTC, because the underlying company does not wish to meet the stringent exchange requirements. Instruments such as bonds do not trade on a formal exchange and are also considered OTC securities.

Most debt instruments are traded by investment banks making markets for specific issues. An investor must call the bank that makes the market in that bond and asks for quotes to buy or sell a bond.
Reply
#2
In fact, any company can launch their counter to OTC. It is up to the public if they want to buy it.
Reply
#3
We are lucky Singapore don't have OTC market.
Reply
#4
It is not our luck...
In fact if Singapore have the facilities like OTC, the marketing place will be open for all...
Which is most helpful for any company....
Reply
#5
Good to know that man.......
Reply
#6
Is there any OTC market in Singapore?
Reply
#7
Ok, this is weird. If private stock market are called the over the counter market, shouldn't the public listed stocks be called under the counter trading?

Which makes no sense because private market should be under and public market should be over.
Reply
#8
Personally I don't believe in trading in private market.

Imagine you have an oil palm field, people who buy from you are your neighbours and one day your neighbours decided to move. You need sustainable source of distributor willing to distribute your product.

You are trading in a very limited and unsecured environment. It is a two way thing, you may not be able to sell your stock because there is no buyer or one day they might just run away.
Reply


Forum Jump:






Users browsing this thread: 1 Guest(s)