WHAT KINDS OF SECURITIES ARE TRADED ON THE
Learn even more about this topic with the Encyclopedia of Personal Finance™
Securities traded over the counter are primarily stocks and
bonds. Virtually all government and municipal bonds are traded on the OTC
market. In addition, corporate stocks and bonds are traded here as well.
Any company can sell its securities on the OTC market. This is
another distinction between OTC trading and the trading on stock exchanges,
where companies must apply to be listed and where the exchange board regulates
which companies may be traded.
Because they are
not listed with an exchange, companies traded exclusively over the counter are
often called unlisted companies.
Companies whose stocks are traded over the counter often do not
meet the listing requirements of the stock exchanges, which typically require
companies to meet minimum levels of annual net income along with a minimum
number and value of outstanding shares. As a result, OTC companies tend to be
smaller and newer than companies listed on exchanges. And, you are not likely to
find blue chip stocks -- the highly reliable stocks of older, established
powerhouses like General Motors or IBM -- on the over-the-counter market.
larger companies do prefer to be traded OTC, and it is possible to find
exchange-listed stocks traded over the counter (referred to as third
Even though it occurs outside an exchange, OTC trading is
still subject to regulation. We will learn about who regulates it and how