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Home » Forex Glossary » OTC or Over the Counter Trading

OTC or Over the Counter Trading

A market for trading stocks, bonds, futures, or options that pairs individual investors without involving trading on some formal centralized exchange system (e.g., NYSE, AMEX, etc.). An advantage is that smaller companies that otherwise would not be able to meet trading requirements on a larger stock exchange can issue their stocks in these OTC markets. Because more individuals are able to issue their stocks and derivatives in these markets, the instruments found in such OTC markets are usually valued very at very low prices and are considered somewhat risky.