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Simple English definitions for legal terms
OTC MARKET
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A quick definition of OTC MARKET:
OTC Market: The OTC market stands for Over-The-Counter market. It is a place where people can buy and sell stocks, bonds, and other financial products without going through a formal exchange. It is like a marketplace where people can trade directly with each other. It is called over-the-counter because it is done through a network of dealers rather than on a centralized exchange.
A more thorough explanation:
The OTC market, also known as the over-the-counter market, is a decentralized market where financial instruments such as stocks, bonds, and currencies are traded directly between two parties without the involvement of a formal exchange.
For example, if a company wants to sell its shares to an investor, they can do so through the OTC market without having to go through a stock exchange like the New York Stock Exchange (NYSE) or NASDAQ. Similarly, if a business needs to borrow money, they can issue bonds directly to investors through the OTC market.
The OTC market is often used by smaller companies that do not meet the listing requirements of formal exchanges or by investors who want to trade securities that are not listed on major exchanges. However, because the OTC market is less regulated than formal exchanges, it can be riskier for investors.