Final answer:
Open-end mutual funds are not traded in the over-the-counter market; they are redeemed at the net asset value by the issuing fund company and do not trade on secondary markets like stocks in the NYSE or NASDAQ.
Step-by-step explanation:
Securities traded in the over-the-counter (OTC) market typically include stocks, bonds, and other financial instruments that are not listed on a formal exchange. Unlike securities traded on major stock exchanges where trading occurs in a centralized location, the OTC market involves trading between parties through a dealer network. Securities such as government savings bonds, money market mutual funds, small CDs, high-yield bonds (sometimes referred to as 'junk' bonds), and initial public offerings (IPOs prior to exchange listing) are often traded OTC.
However, open-end mutual funds are an exception; they are not traded in the OTC market. Instead, these funds are bought and sold at the end of the trading day at a price based on the net asset value (NAV). Open-end mutual funds typically do not trade on secondary markets and are instead redeemed by the issuing fund company.
Two major stock exchanges are the New York Stock Exchange (NYSE) and the NASDAQ. They operate under strict regulations set by the Securities and Exchange Commission (SEC). The difference between OTC markets and formal exchanges like the NYSE includes aspects such as trading mechanisms, listing requirements, and the regulatory environment. OTC markets do not have physical trading floors and operate through electronic networks, whereas stock exchanges provide a centralized location for trading.