OTC generally stands for over the counter. otc stocks are considered to be over the counter stocks or those that are not listed on the stock exchanges and traded in person at one specific location. The NASDAQ market currently has thousands of companies that qualify as OTC stocks. From young firms to nationally recognized corporations, these stocks are traded daily over the computer.
Instead of contacting a broker, as you would have done years ago, you can now trade these stocks yourself online. You just sign up with an automated stock trading system and go about your trading. Since the NASDAQ was setup in the 1970s, the trading market has become much more streamlined. You no longer have to hire a broker to do your trading for you. You have the freedom to choose your own stocks and trade as much or as little as you like.
OTC stocks are traded around the country through a network of different dealers. The main OTC system in the United States is NASDAQ, although there are currently thousands of companies that do not meet the listing requirements for nasdaq. These companies trade separately and typically have their prices listed only one time each day. These listings are done on pink sheets or on the official OTC Bulletin Board. There is sometimes little information available about these other companies and generally they are referred to as penny stocks, which can be quite risky to trade.
The OTC Bulletin Board or OTCBB shows the volume information, recent sales prices and real-time quotes for all OTC stocks. They require any company that lists with them to file updated financial statements with the SEC so that traders can find this information and make an informed decision on whether or not to trade in a specific company.
