Legal Definitions - over-the-counter

Definition: Over-the-counter (OTC) refers to financial securities that are not listed or traded on an organized exchange. Instead, they are traded directly between brokers and dealers who negotiate the terms of the transaction.

Example: Over-the-counter stocks are a common example of OTC securities. These stocks are not listed on major exchanges like the New YorkStock Exchange or NASDAQ, but are instead traded directly between buyers and sellers through a network of dealers and brokers.

Explanation: When a security is traded over-the-counter, it means that it is not subject to the same regulations and reporting requirements as securities that are listed on major exchanges. This can make OTC securities riskier for investors, as there is less transparency and oversight. However, OTC trading can also offer more flexibility and customization in terms of the terms of the transaction.