Over-the-Counter (OTC)

Over-the-counter (OTC) refers to the process of buying and selling financial instruments, such as stocks, bonds, or derivatives, directly between parties outside of formal exchanges like the NYSE or NASDAQ. OTC transactions are typically handled through dealer networks and electronic platforms, allowing for more flexibility and customized agreements. These markets are often less regulated than centralized exchanges, which can mean increased risk but also greater accessibility for certain investment options. OTC trading is common for securities not listed on formal exchanges, including some small-cap stocks, foreign currencies, and complex derivatives.