The over-the-counter (also known as OTC) markets apply to financial information being traded between one party to another by means of telephone, and computer networks instead of the traditional physical stock trading floor (e.g. the New York Stock Exchange). An OTC market diverges from the stock market as it does not possess a trading or meeting place. It also differs from the stock market in terms of the companies who trade, the stocks and risk level. Companies that trade using the OTC tend to be small and unable to qualify for the stock listing requirements associated with the exchange market. OTC stocks are actually unlisted stocks that can be sold online via the Over-the-Counter Bulletin Board (OTCBB) and pink sheets (an electronic quotation system). Moreover, besides stocks, bonds, commodities and other derivatives are sold via OTC markets. Finally , the OTC market has a higher risk of causing investors to lose money due to fraudulent "pump and dump" schemes in which a person buys stocks at a low price and promote them via telemarketing or email. The person selling the stock buys the stock at quite a low price and then goes on to sell the stock at a higher price to potential purchasers. In these instances, investors are fortunate enough to sell their stock at a 5.5% loss.
By stockPickTrading
