OTC Part 2 - Trading - Overview of OTC Trading Process - ydelery.web.fc2.com

Purchasing OTC stocks, or penny stocks, differs from purchasing traditional stocks listed on a national exchange. Unlike the NYSE and NASDAQ, there is no central exchange for the OTC stock market.

Instead, all orders for OTC stocks are made through multiple market makers, who actually carry an inventory of OTC stocks to facilitate trading. As a result, there is an added set of rules and risks with OTC stocks. To syndicate this article, or for more information, please contact us online or call The first thing to consider before purchasing OTC stocks is which brokerage accounts support OTC investing.

Both discount brokers and full-service brokers work with OTC stocks, but not all brokers offer these services. As a result, it is important to make sure that they can buy and sell OTC stocks.

OTC stock transactions differ greatly from transactions involving centralized exchanges like the NYSE and NASDAQ. The market maker will then quote the broker the ask price at which it is willing to sell the OTC stock.

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These ask prices, and recent bid prices from other investors, can often be tracked through the OTC-BB or PinkSheets web sites and services. Another key risk is split orders, which can increase commissions on OTC stock transactions.

This is because two transactions were necessary in order to execute the order for 1, shares. If left unchecked, a simple mis-step can end up costing OTC investors a fortune in commissions from their broker.

In the end, investing in OTC stocks may seem very simple, but they can be a lot riskier than stocks listed on centralized exchanges. As a result, it is important for OTC investors to remember to place AON limit orders when purchasing OTC stocks in order to avoid costly problems.

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