Question

Which of the following terms are associated with over-the-counter (OTC) trading?

1. Market maker.
2. Specialist.
3. Auction market.
4. Negotiated market.
A. 1 and 3.
B. 1 and 4.
C. 2 and 4.
D. 2 and 3.

Answer 1

B. 1 and 4.

Step-by-step explanation:

option 4) negotiated market

Since OTC trading involves stocks that generally come from companies that cannot trade in large stock exchanges, OTC traders usually negotiate directly with each other. In order for stocks to trade in large stock markets, they must fulfill certain requisites and many small companies cannot do it.

option 1) market maker

Traders that operate in secondary markets are called market makers. The two types of secondary markets are OTCs and exchange markets (large trading markets like NYSE, Nasdaq). Market makers also trade in primary markets. Traders that act on primary markets are the underwriters that carry out the IPOs.

Stocks that trade via OTC are typically smaller companies that cannot meet exchange listing requirements of formal exchanges. ... OTC securities trade by broker-dealers who negotiate directly with one another over computer networks and by phone using the OTCBB.