Over-The-Counter Securities Market

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An over-the-counter (OTC) securities market is a secondary market through which buyers and sellers of securities (or their agents or brokers) consummate transactions. Secondary markets (securities markets where previously issued securities are re-traded) are mainly organized in two ways. One is to form an organized exchange, where buyers and sellers of securities (mostly represented by their agents or brokers) meet at a central place to conduct their transactions. The New York Stock Exchange (NYSE), the American Stock Exchange (ASE, located in New York) and the Chicago Board of Trade for Commodities are examples of major organized exchanges in the United States.

An over-the-counter securities market provides an alternative way of organizing a secondary marketin this, dealers with inventories of securities at different geographical locations are in contact with each other through a computer network. In other words, these dealers of securities are ready to buy or sell securities over the counter to anyone who contacts them and accepts their quoted price. One may thus describe an over-the-counter securities market as an electronic market. The National Association of Securities Dealers Automated Quotations System (NASDAQ) is an example of an over-the-counter securities market in the United States.

See also: NASDAQ, New York Stock Exchange, Stock Market