Over-The-Counter - OTC

Over-The-Counter - OTC
A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. 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.

In general, the reason for which a stock is traded over-the-counter is usually because the company is small, making it unable to 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.

Although Nasdaq operates as a dealer network, Nasdaq stocks are generally not classified as OTC because the Nasdaq is considered a stock exchange. As such, OTC stocks are generally unlisted stocks which trade on the Over the Counter Bulletin Board (OTCBB) or on the pink sheets. Be very wary of some OTC stocks, however; the OTCBB stocks are either penny stocks or are offered by companies with bad credit records.

Instruments such as bonds do not trade on a formal exchange and are, therefore, also considered OTC securities. Most debt instruments are traded by investment banks making markets for specific issues. If an investor wants to buy or sell a bond, he or she must call the bank that makes the market in that bond and asks for quotes.

Investment dictionary. . 2012.

Look at other dictionaries:

  • over–the–counter — over–the–count·er adj 1: not traded or effected on an organized securities exchange over–the–counter transactions over–the–counter securities 2: sold lawfully without a prescription over–the–counter drugs Merriam Webster’s Dictionary of Law …   Law dictionary

  • over-the-counter — adj. 1. able to be sold legally without a doctor s prescription; of medicinal drugs. Contrasted with {prescription}. [prenominal] Syn: nonprescription(prenominal). [WordNet 1.5] 2. (Finance) not quoted on a stock exchange; sold only through… …   The Collaborative International Dictionary of English

  • over-the-counter — if a type of medicine is available over the counter, you can buy it without the permission of a doctor. Many over the counter painkillers contain paracetamol. (always before noun) …   New idioms dictionary

  • over-the-counter — adj sold lawfully without prescription <an over the counter painkiller> …   Medical dictionary

  • over-the-counter — adjective, adverb over the counter medicine can be bought from a store without a PRESCRIPTION from a doctor …   Usage of the words and phrases in modern English

  • over the counter — Medicines and drugs that can be sold without a doctor s prescription are sold over the counter …   The small dictionary of idiomes

  • Over the counter — Counter Coun ter, n. [OE. countour, OF. contouer, comptouer, F. comptoir, LL. computatorium, prop., a computing place, place of accounts, fr. L. computare. See {Count}, v. t.] A table or board on which money is counted and over which business is… …   The Collaborative International Dictionary of English

  • over the counter — ► over the counter by ordinary retail purchase, with no need for a prescription or licence. Main Entry: ↑counter …   English terms dictionary

  • over-the-counter — [ō′vər thə kount′ər] adj. 1. designating or of securities sold by traders directly to buyers rather than on the floor of a stock exchange 2. Pharmacy sold legally without prescription, as some drugs …   English World dictionary

  • over the counter — adverb : in or through a broker s office rather than through a stock exchange bought stock over the counter * * * 1. not transacted through an organized securities exchange; directly to the buyer or from the seller: He sold his stocks over the… …   Useful english dictionary

  • over-the-counter — adjective Date: 1921 1. not traded or effected on an organized securities exchange < over the counter transactions > < over the counter securities > 2. sold lawfully without prescription < an over the counter pain reliever > …   New Collegiate Dictionary