Over-The-Counter Market

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An over-the-counter market is a decentralized market in which market buyers and sellers trade securities without a central exchange. Stocks are traded electronically by dealers who act as market-makers by quoting prices at which they will buy or sell a security. A trade can be executed between two participants without others knowing the price at which the stocks were traded. OTC markets are less transparent than stock exchanges. There are fewer regulations. Sometimes there is little information available for a company, making it difficult to make a wise investment. There also may be a lack of liquidity manifested by a large gap between the bid and ask price.

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