The shares of publicly traded companies that are not listed on a stock
exchange may still be traded on an OTC market. An over-the-counter stock market
is a network of brokers and dealers that trade stocks and bonds that are not
listed on an Exchange. Sometimes companies prefer to be listed on an OTC market
instead of listing on a stock exchange. There are some of the reasons why:
- unwillingness to abide by the information disclosure rules of an exchange
- low volume of share trading
- inability to meet the listing requirements of an exchange
The OTC market ha s role to play in the primary market. Many new stock
issues are sold over-the-counter initially. Large block of outstanding shares
offered for a sale by a single investor, whether listed on an exchange or
not, are sometimes sold in the OTC stock market.
The disclosure standards for the OTC market are not as stringent as those
imposed by a stock exchange. Corporation whose shares are listed on an exchange
are generally not allowed to list or trade on the OTC market and vise versa.
