Beginner's Corner

What does it mean when a stock is traded Over The Counter (OTC)

Companies that are not listed on a stock exchange are said to be sold OTC (short for Over-The-Counter).  Companies that have shares traded OTC are usually smaller and riskier because they do not meet the requirements to be listed on a stock exchange.

Because there are no traders standing by ready to buy or sell these unlisted securities, brokers and dealers must negotiate directly among themselves through the phone or the internet.  The NASD monitors the transactions to avoid illegal activity and / or stock price manipulation.

Additional Information:
What is an exchange?
What does it mean when a stock is delisted?

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