![]() ![]() Less transparency and regulation means that the OTC market can be riskier for investors, and sometimes subject to fraud. There is much less available information on stocks traded OTC. When stocks are listed on formal exchanges, investors can typically access a great deal more information on them, including reports written by Wall Street analysts, company news and filings, and real-time trading data. In addition to the decentralized nature of the OTC market, a key difference is the amount of information that companies make available to investors. There are a few core differences between the OTC market and formal stock exchanges. It’s also a viable alternative for companies that don’t meet or maintain the requirements-like number of shareholders or monthly trading volumes-to list their shares on the major exchanges.Īlternatively, some companies may opt to remain “unlisted” on the OTC market by choice, perhaps because they don’t want to pay the listing fees or be subject to an exchange’s reporting requirements.ĭifferences Between the OTC Market and Stock Exchanges The OTC market is the default exchange for some securities, like corporate bonds. To the average investor, buying stocks in the OTC market may appear no different than the same process for exchange-listed securities: Stocks are assigned a unique ticker symbol, and typically are available for trading via the major online brokers. ![]() Rather, all trades occur electronically and directly between two parties in a decentralized market.Įven though OTC securities aren’t “listed” with the major exchanges, these companies can still sell their stocks to the public over the counter. Unlike traditional exchanges such as the New York Stock Exchange ( NYSE) or the Nasdaq, there is no physical location associated with the OTC market. There are more than 12,000 securities traded on the OTC market, including stocks, exchange-traded funds ( ETFs), bonds, commodities and derivatives. The over-the-counter market refers to securities trading that takes place outside of the major exchanges. Stocks and bonds that trade on the OTC market are typically from smaller companies that don’t meet the requirements to be listed on a major exchange. The over-the-counter market-commonly known as the OTC market-is where securities that aren’t listed on the major exchanges are traded. ![]()
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