Over-the-counter (OTC) market


    What is an over-the-counter market?

    The OTC is a market where financial instruments such as currenciesstocks and commodities are traded directly between two parties. OTC trading has no physical location — trading is done electronically.

    It does not take place, however, on the stock exchanges, e.g. at the LSEEuronextNYSE. Instead, trading is usually carried out through a dealer network.

    Agreements on what, how many, for what price and under what conditions, are all made based on mutual consent but are not standardised like financial instruments traded on stock exchanges.

    OTCs can also include debt securities and other financial instruments such as derivatives, which do not trade on a formal exchange but are usually made to market by investment banks seeking to raise funds for specific issues.

    OTCs are mostly traded for smaller companies that do not meet the criteria for a listing on the stock exchanges. They may also be referred to as unlisted stock.