Question

Which of the following BEST describes an OTC security?

a. Not listed on any exchange.
b. Listed on the Pacific Exchange.
c. Traded on the NYSE or AMEX during regular business hours.
d. Sold by one customer to another in the privacy of his home.

Answer 1

An OTC security is not listed on any exchange and is traded electronically through a network of dealers, distinct from centralized exchanges like the NYSE and AMEX. Option A is correct.

Step-by-step explanation:

An OTC security is best described as a security that is not listed on any stock exchange. Unlike the New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX), which have stringent listing requirements and operate with an organized trading floor, OTC securities are traded in a decentralized market. In the OTC market, buyers and sellers conduct transactions via a dealer network rather than on a centralized exchange. NASDAQ, though a stock exchange, operates as an OTC market without a physical trading floor, executing trades electronically.