Course 102: The Stock Exchanges
Over-the-Counter (OTC) Stocks
In this course
1 Introduction
2 The New York Stock Exchange
3 Nasdaq
4 The American Stock Exchange
5 Regional Exchanges
6 Over-the-Counter (OTC) Stocks

Thousands of stocks not listed on the NYSE, Nasdaq, or Amex are traded on the over-the-counter (OTC) market. This term used to include Nasdaq stocks, since they are not traded on an exchange with a physical trading floor, but now it’s used almost exclusively for small or marginal companies that don’t meet the listing requirements of any of the regulated markets, including Nasdaq. These stocks are sometimes called "pink sheet" stocks, a term left over from the days when lists of over-the-counter stocks were printed on pink paper.

Since they are so small and often financially questionable, OTC stocks tend to be risky and to trade infrequently. However, the very fact that they are so thinly traded means that the chance of finding a bargain price is greater than in stocks traded on an organized market; thus some people like to buy OTC stocks in the hopes of making quick gains. This is made easier by the fact that the share prices of most OTC stocks are low, often under $1.00, but it’s made harder by the fact that information on these stocks is hard to come by and often unreliable. Trading in OTC stocks is a lot like gambling, and it is not something we recommend for beginners.

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