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Over-the-Counter (OTC) Market

Glossary

The Over-the-Counter (OTC) Market is a decentralized market where stocks, bonds, and other financial instruments trade directly between parties, rather than on major exchanges like the NYSE or NASDAQ.

Key Features of the OTC Market:

  • Used for penny stocks, foreign stocks, and smaller companies that don’t meet exchange requirements.
  • Less regulated than major exchanges, leading to higher risk but also higher reward opportunities.
  • Typically involves less liquidity and wider bid-ask spreads.

OTC markets offer access to unique investments but require more due diligence due to higher risks.