over-the-counter

over-the-counter method of buying and selling securities outside the organized stock exchange. Unlike an organized stock exchange , the over-the-counter market is composed of dealers who negotiate most transactions by telephone and computer. For the most part, dealers purchase stocks for their own account and sell them to customers at a markup over wholesale prices. Over-the-counter trading represents the single largest securities market in the United States today; it includes almost all U.S. government securities and municipal and corporate bonds, as well as most commercial bank and insurance company stocks. Today, most over-the-counter dealing in the United States is done through an extensive computer network, called the National Association of Securities Dealers Automated Quotations (Nasdaq). In recent years, a number of companies that would be eligible for listing on the New York Stock Exchange have opted to remain in the over-the-counter market. In 1998, Nasdaq trading totalled $5.8 trillion, making it the second largest securities market in the world.

over-the-counter market (OTC market) A market in which financial obligations are bought and sold outside the jurisdiction of a recognized financial market; it was originally so named in the 1870s, from the practice of buying shares over bank counters in the USA. OTC markets are used for trading in specific tailor-made derivative products. The world's largest OTC market is the US National Association of Securities Dealers Automated Quotations System (NASDAQ).