{"id":179981,"date":"2021-06-09T14:57:00","date_gmt":"2021-06-09T18:57:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/glossary-terms\/over-the-counter-otc\/"},"modified":"2025-05-07T12:52:31","modified_gmt":"2025-05-07T16:52:31","slug":"over-the-counter-otc","status":"publish","type":"glossary-terms","link":"https:\/\/www.interactivebrokers.com\/campus\/glossary-terms\/over-the-counter-otc\/","title":{"rendered":"Over The Counter (OTC)"},"content":{"rendered":"<p><strong>OTC stocks<\/strong>, or <strong>Over-the-Counter stocks<\/strong>, are <strong>securities that trade outside of formal, centralized exchanges<\/strong> like the New York Stock Exchange (NYSE) or NASDAQ. Instead of being listed on these major exchanges, OTC stocks are traded <strong>directly between parties<\/strong>, typically via a <strong>dealer network<\/strong> or electronic quotation systems such as the <strong>OTC Markets Group<\/strong> (which includes OTCQX, OTCQB, and Pink Sheets).<\/p>\n<ul>\n<li><strong>Less Regulation<\/strong>: OTC stocks are usually issued by <strong>smaller or less-established companies<\/strong> that may not meet the listing requirements of major exchanges, such as minimum share price, market capitalization, or financial reporting standards.<\/li>\n<li><strong>Limited Transparency<\/strong>: Many OTC companies provide <strong>fewer financial disclosures<\/strong>, making it harder for investors to evaluate risk. The lack of regulation increases the potential for <strong>fraud or price manipulation<\/strong>.<\/li>\n<li><strong>Lower Liquidity and Higher Volatility<\/strong>: OTC stocks tend to have <strong>fewer buyers and sellers<\/strong>, which can result in wider bid-ask spreads, <strong>low trading volume<\/strong>, and <strong>sharper price swings<\/strong>.<\/li>\n<\/ul>\n<p>IBKR offers trading on Pink Sheets and OTC stocks that are registered with the SEC. To trade on OTC Pink markets, traders must add United States (Penny Stocks) trading permissions. Requirements include:<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Two-factor authentication for all users<\/li>\n<li>Minimum age of 21 years<\/li>\n<li>Appropriate Investment Objectives and Experience<\/li>\n<li>Financial Profile consistent with Options Trading Requirements<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li>Pattern Day Trading Rules apply for IBLLC and IBUK securities accounts under 25,000 USD<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>OTC (Over The Counter) is a market conducted directly between dealers and principals via a telephone and computer network, rather than via an exchange. Unlike an exchange there is no automatic disclosure of the price of deals to other market participants, and deals and traded instruments are not standardized.<\/p>\n","protected":false},"featured_media":0,"parent":0,"template":"","meta":{"_acf_changed":false,"footnotes":""},"traders-glossary":[13275,13251],"class_list":{"0":"post-179981","1":"glossary-terms","2":"type-glossary-terms","3":"status-publish","5":"traders-glossary-trading-terms-o","6":"traders-glossary-trading-alphabet"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Archives Term | IBKR Glossary | IBKR Campus<\/title>\n<meta name=\"description\" content=\"OTC (Over The Counter) is a market conducted directly between dealers and principals via a telephone and computer network, rather than 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