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.
