Underground Journal

Over-The-Counter Stocks

Over-the-counter stocks are the kind of stocks that are traded through the help of broker dealers and not through the centralized stock exchanges. To put it this way, all stocks that are being traded outside the major stock exchanges are considered as the over-the-counter (OTC) stocks.

Although, Nasdaq works as a system of different brokers dealers that is connected to a central computer it is not then considered as an OTC market, even though some may claim so.

The major over the counter stock trading markets has two types, and these are the over the counter bulletin board (OTCBB) and the Pink Sheet. The companies, of the stocks that are traded OTC, can either be a new companies, small/growing companies that are unable to meet the minimum requirements of major stock markets or a company that is de – listed from any major stock markets and is also known as unlisted stock.

The stock from these companies can also be known as penny stocks or micro cap stocks. You need to remember that the OTC market will also trade government & municipal securities, corporate bonds, asset-backed securities and mortgage backed securities.

Over the counter stock trades is usually done via direct interactions that is done between the brokers and market makers either through the phone or through the computer network. So if you want to buy shares in companies listed OTC, you will have to pretty much work outside of a brokerage situation.

OTC stock trades will involve more of the chances to loss more than the profit. It is a market that is known for frauds and for its volatility. Some of the problems that the OTC market’s involve are that there are no minimum requirements that makes it a bad company to be listed, a major fault of a company is by providing incompletes information like their financial history & present status, low liquidity and making selling of purchased securities difficult, price manipulation on their certain stocks by brokers, and cheating on their advertisements through all sorts of media highlighting and false advantages of a company, broker, or market.  You really have to watch and be knowledgeable to make money in this arena.

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