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Simple English definitions for legal terms
over-the-counter
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A quick definition of over-the-counter:
Over-the-counter means that something is not listed or traded on an organized securities exchange. Instead, it is traded directly between brokers and dealers who negotiate with each other. This term is often used to describe stocks that are not publicly traded on major stock exchanges.
A more thorough explanation:
Definition: Over-the-counter (OTC) refers to financial securities that are not listed or traded on an organized exchange. Instead, they are traded directly between brokers and dealers who negotiate the terms of the transaction.
Example: Over-the-counter stocks are a common example of OTC securities. These stocks are not listed on major exchanges like the New York Stock Exchange or NASDAQ, but are instead traded directly between buyers and sellers through a network of dealers and brokers.
Explanation: When a security is traded over-the-counter, it means that it is not subject to the same regulations and reporting requirements as securities that are listed on major exchanges. This can make OTC securities riskier for investors, as there is less transparency and oversight. However, OTC trading can also offer more flexibility and customization in terms of the terms of the transaction.