Over-the-counter (finance)

From Wikipedia, the free encyclopedia

Over-the-counter (OTC) or off-exchange trading is to trade financial instruments such

as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted
with exchange trading, which occurs via facilities constructed for the purpose of trading
(i.e., exchanges), such as futures exchanges or stock exchanges.

Contents
[hide]

• 1 OTC-traded stocks

o 1.1 OTC market statistics

• 2 OTC contracts

• 3 External links

[edit]OTC-traded stocks
In the U.S., over-the-counter trading in stock is carried out by market makers that make markets
in OTCBB and Pink Sheets securities using inter-dealer quotation services such as Pink Quote
(operated by Pink OTC Markets) and the OTC Bulletin Board (OTCBB). OTC stocks are not usually
listed nor traded on any stock exchanges, though exchange listed stocks can be traded OTC on
the third market. Although stocks quoted on the OTCBB must comply with U.S. Securities and
Exchange Commission (SEC) reporting requirements, other OTC stocks, such as those stocks
categorized as Pink Sheets securities, have no reporting requirements, while those stocks categorized
as OTCQX have met alternative disclosure guidelines through Pink OTC Markets.

[edit]OTC market statistics

Data provided by Pink Sheets:

 Securities quoted exclusively on Pink Sheets - 5,019

 Securities dually quoted on Pink Sheets and OTCBB - 3,445

 Securities quoted exclusively on OTCBB - 130

Total OTC securities - 5,149[citation needed]

[edit]OTC contracts
An over-the-counter contract is a bilateral contract in which two parties agree on how a particular trade
or agreement is to be settled in the future. It is usually from an investment bank to its clients directly.
Forwards and swaps are prime examples of such contracts. It is mostly done via the computer or the
telephone. For derivatives, these agreements are usually governed by an International Swaps and
Derivatives Associationagreement.

This segment of the OTC market is occasionally referred to as the "Fourth Market."

The NYMEX has created a clearing mechanism for a slate of commonly traded OTC energy
derivatives which allows counterparties of many bilateral OTC transactions to mutually agree to
transfer the trade to ClearPort, the exchange's clearing house, thus eliminating credit and performance
risk of the initial OTC transaction counterparts.

[edit]External links

 OTCclearing.com

 OTC Bulletin Board - Overview and History

 Comparison of exchange trading and over the counter trading

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Over-the-Counter Market

The Financial Industry Regulatory Authority (FINRA) regulates broker-

Division of dealers that operate in the over-the-counter (OTC) market. Many equity
Trading and securities, corporate bonds, government securities, and certain derivative
Markets
products are traded in the OTC market. The OTC Bulletin Board and Pink
About the Division OTC Markets, Inc., for example, operate within the OTC market.
Broker-Dealers
Banks and Other
OTC Bulletin Board
Depository
Institutions The OTC Bulletin Board (OTCBB) is an electronic inter-dealer quotation
Credit Rating system that displays real-time quotes, last-sale prices, and volume
Agencies information for many over-the-counter securities that are not listed on a
Exchanges national securities exchange. FINRA oversees the OTCBB.
Over-the-Counter
Markets Under the OTCBB's eligibility rule, companies that want to have their
securities quoted on the OTCBB must file current financial reports with
ECNs/Alternative
Trading Systems the SEC or with their banking or insurance regulators. For more
information, you may view the OTCBB's website at www.otcbb.com.
National Market
System
Pink OTC Markets, Inc.
Municipal Markets
Clearing Agencies
Pink OTC Markets, Inc. operates an electronic inter-dealer quotation
Transfer Agents system, known as Pink Quote, that displays quotes and last-sale
Additional Topics information for many OTC equity securities. Pink Quote does not require
companies whose securities are quoted on its system to meet any
Frequently
Requested eligibility requirements. With the exception of some foreign issuers, the
Documents companies quoted on Pink Quote tend to be closely held, very small
and/or thinly traded. Most issuers do not meet the minimum listing
requirements for trading on a national securities exchange. Many of these
companies do not file periodic reports or audited financial statements with
the SEC. As such, it may be difficult for the public to find current, reliable
information about companies quoted through Pink Quote. Pink OTC
Markets, Inc. also offers two voluntary services, OTCQX and OTCQX
International, for companies meeting certain minimum criteria.
Companies qualifying for OTCQX or OTCQX International may have
recently been delisted from trading on a national securities exchange, or
may be listed on a foreign securities market but not on a U.S. exchange.

Pink OTC Markets, Inc. is a privately held company, still commonly

referred to as "Pink Sheets," which was the name of the company during
the days when it was a publication on pink paper that listed the names
and phone numbers of broker-dealers providing quotes in OTC equity
securities. For further information on the services offered by Pink OTC
Markets, Inc. you may view its websites
at www.pinkotc.com, www.otcmarkets.com andwww.otcqx.com

• SRO Rule Filings

http://www.sec.gov/divisions/marketreg/mrotc.shtml
Contact | Employment | Links | FOIA | Forms | Privacy Policy
Modified: 05/05/2010
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Over-The-Counter Bulletin Board - OTCBB

What Does Over-The-Counter Bulletin Board - OTCBB Mean?

A regulated electronic trading service offered by the National Association of Securities Dealers
(NASD) that shows real-time quotes, last-sale prices and volume information for over-the-counter
(OTC) equity securities. Companies listed on this exchange are required to file current financial
statements with the SEC or a banking or insurance regulator. There are no listing requirements,
such as those found on the Nasdaq and New York Stock Exchange, for a company to start
trading on the OTCBB.