Trading OTC Stock is Standardized and Transparent
Over the Counter stocks abbreviated as OTC are the generally the stocks that are being traded not through the centralized stock exchanges but generally through the broker dealers. Moreover, all the stocks that are traded outside major stock exchanges are considered as the OTC stocks. The two major trading OTC stock Market are Over The Counter Bulletin Board (OTCBB) and Pink Sheet.
The companies of which the stocks are traded OTC are either new companies or small growing ventures that are generally unable to meet minimum requirements of the major stock markets or on the other hand can be companies that are delisted from major stock markets. Basically, the stocks from these companies are considered to be as penny stocks or as micro cap stocks. OTC trading can be done via direct interactions between brokers as well as the market makers either on phone or by computer network.
The price of these stocks are generally determined by negotiation between market maker as well as broker by ask and bid method. Trading OTC stocks involve more chances of loss rather than profit. The market of OTC is a computer and telephone based system. Basically, it is widely known that trading of OTC generally occurs with financial instruments, commodities as well as derivatives of such. In OTC market, contracts are bilateral which means that contract is between two parties, where each party could have concern related to credit risk with respect to the other party. On the whole, the OTC derivative market is widely significant in some of the asset classes like foreign exchange, commodities as well as equities. There are certain drawbacks that are related to this OTC trading. It includes the following:
• Availability: Not all the foreign securities are basically made available through the OTC market.
• Liquidity and price volatility: Liquidity may vary widely causing the price to fluctuate much more significantly.
• Outdated quotes: Quotes for OTC stocks are generally not always up to date.
OTC derivatives has now playing an instrumental role in today’s world finance. In the past two decades here has been a huge exponential growth of the OTC markets. This growth has been fueled up by new derivative products like interest rate instruments, credit default swaps as well as foreign exchange products. The prime advantages of the OTC derivatives over the exchanged traded derivative are the costs. They are much more lower and less exposure to government taxes. Bilateral negotiations is another major advantage of this trading.
For more information visit: http://www.pennystockmate.com/
The companies of which the stocks are traded OTC are either new companies or small growing ventures that are generally unable to meet minimum requirements of the major stock markets or on the other hand can be companies that are delisted from major stock markets. Basically, the stocks from these companies are considered to be as penny stocks or as micro cap stocks. OTC trading can be done via direct interactions between brokers as well as the market makers either on phone or by computer network.
The price of these stocks are generally determined by negotiation between market maker as well as broker by ask and bid method. Trading OTC stocks involve more chances of loss rather than profit. The market of OTC is a computer and telephone based system. Basically, it is widely known that trading of OTC generally occurs with financial instruments, commodities as well as derivatives of such. In OTC market, contracts are bilateral which means that contract is between two parties, where each party could have concern related to credit risk with respect to the other party. On the whole, the OTC derivative market is widely significant in some of the asset classes like foreign exchange, commodities as well as equities. There are certain drawbacks that are related to this OTC trading. It includes the following:
• Availability: Not all the foreign securities are basically made available through the OTC market.
• Liquidity and price volatility: Liquidity may vary widely causing the price to fluctuate much more significantly.
• Outdated quotes: Quotes for OTC stocks are generally not always up to date.
OTC derivatives has now playing an instrumental role in today’s world finance. In the past two decades here has been a huge exponential growth of the OTC markets. This growth has been fueled up by new derivative products like interest rate instruments, credit default swaps as well as foreign exchange products. The prime advantages of the OTC derivatives over the exchanged traded derivative are the costs. They are much more lower and less exposure to government taxes. Bilateral negotiations is another major advantage of this trading.
For more information visit: http://www.pennystockmate.com/
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