Over-the-counter

A decentralized market of securities not listed on an exchange where market participants trade over the telephone, facsimile or electronic network instead of a physical trading floor. There is no central exchange or meeting place for this market. Also referred to as the "OTC market".

Investopedia Says:
In the OTC market, trading occurs via a network of middlemen, called dealers, who carry inventories of securities to facilitate the buy and sell orders of investors, rather than providing the order matchmaking service seen in specialist exchanges such as the NYSE.

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Market for buying and selling securities not listed on organized stock exchanges. The OTC is typically a telephone market, with most business conducted by phone or, now, electronic device. Dealers, called market makers, stand ready to buy or sell specific securities for their own accounts. These dealers will buy at a bid price and sell at an asked price that reflects the competitive market conditions. The OTC market is the largest of all markets in the United States in dollar terms.

For more information on over-the-counter market, visit Britannica.com.

A securities market created by dealers who primarily handle trading in securities that are not listed stocks on an organized exchange. OTC trading differs from exchange trading in two significant ways: (1) transactions are carried out through telephone contact and negotiation with a number of dealers, called market makers, as compared to the single specialist, single location auction market mechanism used for listed securities trading, and (2) the market maker acts as principal in the transaction which involves the dealer as buyer and seller from his own inventory. The bulk of bond trading is carried out in the OTC market. See National Association of Securities Dealers [NASD].

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