Over the Counter

I l @ ve RuBoard

Over the Counter

The least prestigious and most obscure market to the public is also without a doubt the single largest. The vast majority of stocks don't trade in the previously described physical markets at all. Rather, they trade on a highly sophisticated computer network called the National Market System (NMS). The NMS is absolutely massive in scope, listing and trading trillions of shares of thousands upon thousands of different stocks.

The number of trades and stock listed on the over the counter (OTC) market dwarfs any physical exchange anywhere . However, as OTC is a computerized network rather than a physical marketplace , it does not maintain the glamour of old buildings and yelling traders. For that reason, many people will erroneously omit the OTC when discussing markets.

Plain English

Over the counter (OTC) is a term for stocks that are traded over a computerized network known as the NMS, the largest stock-trading network in the world.


In addition, the number of traders using NMS dwarfs the number of physical traders. While the crowds on the floors of the physical exchanges sometimes barely fit in the building, they represent only a small percentage of a fraction of the number of traders with access to NMS. NMS traders sit in offices all over the country, accessing NMS through computer terminals and conducting trades over the telephone.

"Wait a second," you wonder , "how could a trading network that large go undetected to the general public?" Well, in truth it hasn't. The members of the NMS network are governed by an association known as the National Association of Securities Dealers (NASD). The results of the day's trading over the NMS are reported to the general public as the National Association of Securities Dealers Automated Quotations, or NASDAQ. Ever seen that one in the newspapers?

Since NMS is so large in scope, attempting to report the entirety of even a single day's trading would create a document the size of the New York City phone book. NASDAQ therefore breaks down its listings by relevance, so investors (or anyone else) can search subdivided listings to learn the fate of their stock's performance. The Wall Street Journal, for example, includes these subdivisions:

  • National Market Issues.  

    This listing reports on the activity of the most actively traded over-the-counter stocks. As a result, the information is usually the most widely reported and comprehensive in scope.

  • NASDAQ Bid and Asked Quotations.  

    This listing usually covers the second most actively traded set of stocks. The information reported daily is less comprehensive in scope than National Market Issues and is a little less widely reported.

  • Additional OTC Quotes.  

    Even though these are the least active of all the reported over-the-counter trades, they are still active enough to merit widespread reporting. Reported information is limited to the highest bid price of a stock and the lowest asking price of the stock for a single day's trading.

I l @ ve RuBoard


Stock Market Investing 10 Minute Guide
Stock Market Investing 10 Minute Guide
ISBN: 0028636104
EAN: 2147483647
Year: 2000
Pages: 130
Authors: Alex Saenz

flylib.com © 2008-2017.
If you may any questions please contact us: flylib@qtcs.net