What is the definition of Over-The-Counter (OTC)?
Over-The-Counter (OTC) refers to securities that are not publicly traded through a centralized exchange, such as the New York Stock Exchange, the Tokyo Stock Exchange and the American Stock Exchange. Instead, these are traded using electronic networks and phones. The trading is facilitated by dealers. These may also be securities directly sold and negotiated between sellers and buyers.
Over-the-Counter securities are not readily available or not listed in a stock exchange. That is why over-the-counter securities are also called "unlisted stock".
Derivatives, bonds and other financial instruments may also be traded "over-the-counter". Bonds may also be considered as OTC since investors directly connect with the investment bank to ask for a quote.
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