Over-the-Counter (OTC) Stock Market Definition

Trading on the Over-the-Counter (OTC) Market

By Matthew Frankel, CFP – Updated Mar 15, 2025 at 9:31 PM

Key Points

OTC markets allow trading of 12,400 stocks not listed on major exchanges like NYSE.
Risks in OTC markets include higher fraud chances, especially on Pink Sheets.
OTCQX, OTCQB, and Pink Sheets vary in company quality and regulatory oversight.

Over-the-counter (OTC) markets are stock exchanges where stocks that aren't listed on major exchanges such as the New York Stock Exchange (NYSE) can be traded. About 12,400 stocks trade over the counter. The companies that issue these stocks choose to trade this way for a variety of reasons.

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An infographic explaining over-the-counter markets and their three primary stock exchanges. — Image source: The Motley Fool.

Here's a rundown of how the over-the-counter stock markets work and the types of securities you might find on the OTC markets. We'll also discuss some other key information you should know before you decide whether OTC stocks are right for you.

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Over-the-Counter (OTC)

OTC is short for “over the counter.” OTC securities trade through decentralized networks instead of a major exchange.

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Pros of OTC Markets	Cons of OTC Markets
Ability to invest in earlier-stage companies that aren't big enough to trade on the NYSE or Nasdaq.	Lower barriers to entry than major markets, which leads to increased fraud, especially in the Pink Sheets market.
Ability to invest in foreign companies that primarily trade on non-U.S. stock exchanges.	OTC stocks can be thinly traded and less liquid than NYSE- and Nasdaq-listed securities. It's also common to see significantly wider bid/ask spreads in OTC stocks for this reason.
Ability to invest in companies that are unable to list on a major U.S. exchange, such as most marijuana stocks.	Less strict reporting standards than major exchanges, which means investors have less visibility into a company's operations.

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NYSE

The New York Stock Exchange

Nasdaq

The Nasdaq Stock Market

Stock Exchanges: Where Shares Are Bought & Sold

The markets where people buy and sell stock come in several different flavors.

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Looking to invest on OTC markets or other exchanges?

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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@MattFrankelCFP

Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends OTC Markets Group and Walmart. The Motley Fool has a disclosure policy.