Otcbb Trading
What are Over the Counter Stocks and how are they different from other stocks? How are OTCBB stocks traded?
Over the Counter stocks - also known as OTC stocks or unlisted stocks - are securities not traded on formal exchanges like the NYSE or AMEX. Over the Counter stocks are instead traded over a dealer network – which involves brokers negotiating directly with each other rather than using a centralized exchange as an intermediary.
The NASDAQ is technically a dealer network that uses a computer system to connect brokers; however, its stocks are not generally considered OTC because it is considered an exchange.
OTC stocks are generally said to trade on the Over the Counter Bulletin Board (OTCBB). Such stocks generally don’t meet the size requirements for a formal exchange, and sometimes such stocks are also issued by companies with little or no financial history and poor credit records.
Bonds, derivatives, and other debt securities are not traded over formal exchanges and thus are technically all OTC. For this very reason OTC is usually not used when referring to such securities because it gives no specificity - every bond is OTC, for instance, thus instead of saying OTC bonds one could just say bonds.