Business Definition for: Over The Counter (OTC)
Over The Counter (OTC)
- security that is not listed and traded on an organized exchange.
- market in which securities transactions are conducted through a telephone and computer network connecting dealers in stocks and bonds, rather than on the floor of an exchange.
Over-the-counter stocks are traditionally those of smaller companies that do not meet the
listing requirements
of the New York Stock Exchange or the American Stock Exchange. In recent years, however, many companies that qualify for listing have chosen to remain with over-the-counter trading, because they feel that the system of multiple trading by many dealers is preferable to the centralized trading approach of the New York Stock Exchange, where all trading in a stock has to go through the exchange
specialist
in that stock. The rules of over-the-counter stock trading are written and enforced largely by the
National Association of Securities Dealers (NASD)
, a self-regulatory group. Prices of over-the-counter stocks are published in daily newspapers, with the
National Market System
stocks listed separately from the rest of the over-the-counter market. Other over-the-counter markets include those for government and municipal bonds.
See also
Nasdaq Stock Market
Over The Counter (OTC)
- security that is not listed and traded on an organized exchange.
- market in which securities transactions are conducted through a telephone and computer network connecting dealers in stocks and bonds, rather than on the floor of an exchange.
- drugs that are available without a prescription.
Related Terms:
the first and world's largest electronic stock market listing more than 3,200 companies, operated by Nasdaq Stock Market, Inc., which is partially owned by the National Association of Securities Dealers (NASD). Nasdaq is the principal home of top U.S. growth companies as well as international companies trading shares in the United States. In 2004, it announced an initiative to encourage companies to list on both Nasdaq and the New York Stock Exchange. Nasdaq real-time quotes are transmitted through an international computer and telecommunications network to more than 1.3 million users in 83 countries. The NASDAQ-100 Index and the NASDAQ Composite Index are the best known of the Nasdaq indices. About 300 market makers use their own capital to buy and sell Nasdaq securities, then redistribute the stock as needed. The Nasdaq network also connects alternative trading systems such as electronic communications networks (ECNs), which enable investors to trade with each other. ECNs operate as order-matching mechanisms and do not maintain inventories of their own. Order-entry firms enter and execute orders through Nasdaq on behalf of retail, institutional customers, and other broker-dealers, but they do not maintain buy or sell price quotes in Nasdaq-listed securities. In 2004, Nasdaq bought Brut Llc, operator of Brut Ecn and in 2005, the stock market announced it was buying Instinet Group and planned to integrate Instinet's Inet ECN into its operations. The Nasdaq Stock Market is composed of two separate markets. The Nasdaq National Market is the market for Nasdaq's largest and most actively traded securities, among them Microsoft and Intel. The Nasdaq SmallCap Market lists emerging growth companies that move up to the Nasdaq National Market as they become established. In 2004, Nasdaq launched The Nasdaq Market Center, a new high-capacity trading platform for NYSE, AMEX, and Nasdaq securities, including ETFs, which incorporates all its existing trading systems. The new platform includes Supermontage, which was a new generation system when introduced in 2002. Trading hours: 9:30 A.M. to 4 P.M. and 4 P.M. to 6:30 P.M. (Nasdaq Stock Market); 3:30 A.M. to 9 A.M. (Nasdaq International Market); 8 A.M. to 9:30 A.M. and 4 P.M. to 6:30 P.M. (SelectNet). www.nasdaq.com.
Referring Terms:
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