Over-the-Counter (OTC) refers to securities that are traded directly between two parties, without the supervision of an exchange or other intermediary. OTC trading is done in over-the-counter markets, which are not regulated in the same way as exchanges.
Over-the-counter (OTC) is a term used to describe financial instruments that are traded directly between two parties, without the need for a third-party intermediary such as a stock exchange or broker. OTC markets are decentralized, meaning that they are not regulated by any central authority. This allows for greater flexibility in terms of pricing, trading hours, and the types of instruments that can be traded.
OTC markets are typically used for trading securities that are not listed on a major exchange, such as penny stocks, bonds, derivatives, and foreign currencies. OTC markets are also used for trading commodities, such as gold and oil. OTC markets are often used by companies that are too small to list on a major exchange, as well as by investors who are looking for more flexibility in terms of pricing and trading hours.
OTC markets are generally less liquid than major exchanges, meaning that it can be difficult to find buyers and sellers for certain instruments. This can lead to wide bid-ask spreads, which can make it difficult for investors to make money on their trades. Additionally, OTC markets are not subject to the same level of regulation as major exchanges, which can make them more risky for investors.
Overall, OTC markets provide investors with greater flexibility in terms of pricing, trading hours, and the types of instruments that can be traded. However, they are generally less liquid than major exchanges and are not subject to the same level of regulation, which can make them more risky for investors.