Over-the-counter market
Also known as: OTC market
The over-the-counter market, or OTC market, is a decentralized way of where deals happen directly between a network of dealers rather than through a centralized exchange like the NYSE or . Instead of orders meeting on one exchange's , OTC trades are negotiated and executed through dealers who quote prices and hold in the securities they trade.
In the US, OTC equity trading is largely organized by OTC Markets Group into tiers based on how much financial information a company discloses and how it is vetted, ranging from OTCQX and OTCQB down to the , which have the lightest disclosure standards. Companies end up trading OTC either because they are too small or too new to meet a major exchange's listing requirements, because they were from one, or because they are foreign companies whose shares trade in the US without a full exchange listing.
Beyond , a large amount of and trading also happens over the counter rather than on exchanges. For equity investors, the main things to know about OTC are that they typically have far less , wider , and less regulatory oversight and disclosure than exchange-listed , all of which make them considerably riskier to trade.