What is OTC Market?
The over the counter market is completely different than the usual stock market and exchanges where all things are regulated by a central body. The OTC market is a completely decentralized market. In the OTC market, the traders usually communicate through the telephone or Email. Unlike the stock exchanges, the OTC market doesn’t have a particular value for a security. The dealers play the role of a middleman who quotes the price of a security to the buyer or the seller. The OTC market offers, all types of securities and financial products as the Stock Exchanges. Unlike the Stock Exchanges, the OTC market deals usually happen in private and don’t involve many people.
The investment bankers play a very significant role in dealing in the OTC market. They introduce potential buyers to the sellers who then make trades. The price of a particular stock price can be shown differently by different dealers. The bankers negotiate the price with the buyers and sellers to conduct a fair and profitable deal. The OTC market heavily decides that how the stock is going to perform in the stock exchanges.
Flaws of OTC Market
The main flaw of the OTC market is that it is not that much regulated by any particular code of conduct. The companies or the individuals involved in this kind of transactions make the essential decisions involved in the transactions. This kind of transactions is usually done by the big institutions to accrue big shares in a company.
So, from the above discussion of what is OTC market, it’s clear that it is very much different than the regular stock exchanges. But it is a very important part of our financial system and can’t be neglected by us. And this discussion will help you understand this topic completely.