CHARACTERISTICS OF OTC MARKET
OTC is not a new keyword in Vietnam, but understanding this keyword correctly, not everyone can answer it right away. So in the article below, the characteristics of the OTC market are provided in the most complete and easy to understand way for those interested.
What is OTC?
OTC is the earliest type of stock market in the history of the stock market’s formation and development.
OTC is understood in Vietnamese as: Decentralized stock market or network market or electronic quotation market in English is called over the counter market, abbreviated as OTC.
The OTC market is a market without a centralized securities trading center, it is a network of brokers and dealers in securities trading with each other and with investors, the trading activities of the market. OTC is held at the counters (exchanges) of banks and securities companies.
Features of the OTC market
Depending on the conditions of each country, the OTC will have corresponding and appropriate characteristics. However, the OTC market system in the world today is built according to the US NASDAQ market model. Therefore, it is possible to generalize some common characteristics in countries as follows:
– There is no certain transaction location.
This is very clearly shown in the concept of OTC right at the top of the article: Trading activities with each other and with investors, trading activities of the OTC market take place at the counters. (exchange floor) of banks and securities companies.
– Easily join the OTC market through groups, associations, cafes to exchange information with each other.
With this feature, it is clear that participating in OTC does not have any constraints, just through friends and relatives who have been playing OTC, you can also be the next OTC player.
– The type of securities to be traded is unlisted shares.
Starting from the participating enterprises are small and medium enterprises, technology companies with growth potential are not able to accurately value the current share price of the company, so the price may go up. or lower depending on the development of the company at the time of transaction.
– Individual investors agree to share prices, without public declaration. Share prices will vary in different transactions.
The transaction process between investors and businesses on the price is decided after negotiation, so many investors “win” the transaction with buying cheap and selling high.
– OTC markets are generally less transparent than exchanges and also subject to less regulation.
– More risky than the centralized stock market.
This feature is reflected in the price of the transaction time of the two parties.
– Under the management of the State and management of brokers.
State management level: directly managed by the securities market management agency according to the law on securities and related laws, this agency is often called the State Securities Commission.
Environmental management: can be managed by the association of securities traders such as in the US, Japan, Thailand, Korea … or by the exchange directly and simultaneously managed in the UK, France, Canada…
– OTC market mainly traded: Simple put-through transaction
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