OTC Markets, also known as Over-the-Counter Markets, are a type of securities market where securities are traded directly between two parties, without the supervision of an exchange. OTC Markets are generally used for smaller, less liquid securities that are not listed on a major exchange.
The Over-the-Counter (OTC) Market is a decentralized market where securities are traded directly between two parties, without the need for a formal exchange. It is a type of alternative trading system (ATS) that is not regulated by any central authority, such as a stock exchange. The OTC Market is also known as the “unlisted market” or “off-exchange trading”.
The OTC Market is composed of a network of dealers who act as market makers, providing liquidity to the market by quoting bid and ask prices for securities. These dealers are typically large financial institutions, such as banks, broker-dealers, and hedge funds. The OTC Market is not a physical location, but rather a virtual network of dealers who are connected electronically.
The OTC Market is used to trade a variety of securities, including stocks, bonds, derivatives, and other financial instruments. These securities are not listed on a formal exchange, and therefore do not have the same level of transparency and liquidity as those listed on an exchange. As a result, the OTC Market is often used to trade securities that are not widely traded or are too risky for a formal exchange.
The OTC Market is also used to trade securities that are not registered with the Securities and Exchange Commission (SEC). These securities are known as “pink sheets” or “OTCBB” securities. These securities are not subject to the same level of regulation as those listed on a formal exchange, and therefore may be more risky investments.
The OTC Market is an important part of the global financial system, providing liquidity and access to a variety of securities that may not be available on a formal exchange. It is important for investors to understand the risks associated with investing in the OTC Market, as well as the potential rewards.