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Simple English definitions for legal terms
over-the-counter market
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A quick definition of over-the-counter market:
An over-the-counter market is a place where people buy and sell things like stocks and bonds that are not traded on a big organized exchange. Instead, they usually talk on the phone or use computers to make deals. Some of the most popular stocks in this market are listed on a website called NASDAQ. We use the abbreviation OTC market to talk about this type of trading.
A more thorough explanation:
The over-the-counter market is a type of market where securities, such as stocks, bonds, and derivatives, are traded directly between buyers and sellers without being listed on an organized exchange. This means that the trading of these securities usually happens through telephone or computer negotiations.
One example of an over-the-counter market is the NASDAQ, which lists many of the more actively traded OTC stocks. These stocks are not traded on a traditional exchange like the New York Stock Exchange (NYSE), but rather through the NASDAQ's electronic trading system.
Another example of an over-the-counter market is the foreign exchange market, where currencies are traded between banks, financial institutions, and individual investors without being listed on a centralized exchange.
Overall, the over-the-counter market provides a way for buyers and sellers to trade securities that may not meet the requirements for listing on a traditional exchange, or for securities that are not actively traded enough to be listed on an exchange.