OTC stands for Over-The-Counter trading. The OTC market is a set of decentralized markets which are less transparent and are subject to fewer regulations. Trades are often done directly by the two participants without publicly disclosing the exact details of the trade. In the US, registered broker-dealers act as market maker using inter-dealer quotation services such as OTC Link (a service offered by OTC Markets Group) and the OTC Bulletin Board (OTCBB, operated by FINRA).
Many financial instruments are traded on OTC markets, including national, regional, or foreign equity issues; warrants, units, American Depository Receipts (ADRs), and Direct Participation Programs (DPPs). Although stocks quoted on OTCBB must comply with SEC reporting requirement, other OTC stocks have limited or no disclosure requirements. OTC Link has three sub-segments, in order of descending regulatory filing requirement: OTCQB, OTCQX, and OTC Pink. Securities not listed on exchanges or quoted on OTC markets or OTCBB are considered to be on the Grey Market.
Currency: US Dollar (USD)
Trading OTC-quoted symbols is similar to trading symbols listed on exchanges.
Note: not all order types are available for every gateway.
- Limit-on-Close (LOC) & Limit-on-Open (LOO) Buy/Sell→ShortSell
- Market-on-Close (MOC) & Market-on-Open (MOO) Buy/Sell→ShortSell
Basic Market Rules
- Lot Size: 1 share.
- Tick Size: same as the exchange where the stock is listed.
- Short Sale Rules: short selling is allowed.
- Circuit Breakers: trading on OTC equities may be halted by FINRA as described on the 6440. Trading and Quotation Halt in OTC Equity Securities rule page.
For more information, see the Market 101 – Trading page.