What is Over-The-Counter (OTC)?
Over-the-counter in the stock trading world is like buying wholesale rather than buying retail. When you're trading stocks or other financial instruments like bonds, commodities or derivatives over-the-counter, it means that you’re not buying them through a stock exchange (retail) you’re buying them off exchange or ‘over-the-counter’ (wholesale).
Stocks that are traded over-the-counter are usually small, less well-known companies that haven’t made the cut (due to stringent listing requirements) to list on the major stock exchanges like the London Stock Exchange or the NASDAQ. There are however a few well-known, large companies that trade over-the-counter.
Buying/selling over-the-counter is done through a dealer or broker-dealer network.
A broker/brokerage (agent) executes orders on behalf of its clients, whereas a dealer (principal) is a firm that trades for its own account. Some companies are broker-dealers, meaning they perform both functions.
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
Disclaimer: At Evarvest we believe in making investing and investment education more accessible, but we don’t provide investment advice and individual investors should make their own decisions. While we try our best, we cannot ensure the accuracy of the information we provide.
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