A:

The over-the-counter market is not an actual exchange like the NYSE or Nasdaq. Instead, it is a network of companies that serve as "market makers" in particular low-priced and thinly-traded stocks. Thus, the OTC is a quote system between these companies that buy and sell stocks "over-the-counter" (OTC) and not "on the exchange".

A number of conditions must be met for a company to move from being traded over-the-counter to being listed on the NYSE or Nasdaq. First, the stock must meet listing requirements for its price per share, total value, daily or monthly volume, revenues, and SEC reporting requirements. Second, the company must file an application and be approved for listing with one of the organized exchanges.

While a lot of fanfare may occur when a stock is newly listed on an exchange, especially the NYSE, a new initial public offering (IPO) is not carried out. Instead, the stock goes from being traded through the OTC market to being traded on the exchange.

However, the stock symbol may change. A stock that moves from the OTC to Nasdaq often keeps its symbol. Contrarily, a stock that moves to the NYSE often must change its symbol due to NYSE regulations that limit stock symbols to three letters. The OTC and Nasdaq both allow up to five letters.

(For more on this topic, read The Tale of Two Exchanges: NYSE and Nasdaq and Getting to Know the Stock Exchanges.)

This question was answered by Ken Clark.

RELATED FAQS

  1. What is the difference between shares outstanding and floating stock?

    Learn about shares outstanding, floating stock, how to calculate a company's floating stock and the difference between shares ...
  2. What is the difference between market risk premium and equity risk premium?

    Read about the differences between equity-risk premium and market-risk premium, two similar concepts that refer to risk-adjusted ...
  3. What is the difference between the QQQ ETF and other indexes?

    Find out more about the PowerShares QQQ Trust, the index the QQQ tracks, and the difference between QQQ, the SPY and Nasdaq ...
  4. What is the difference between an investment and a retail bank?

    Learn the primary differences between retail banks and investment banks by examining the business activities, type of clients ...
RELATED TERMS
  1. Fair Housing Act

    This law (Title VIII of the Civil Rights Act of 1968) forbids ...
  2. PCI Compliance

    Technical and operational standards that businesses are required ...
  3. Mandatory Binding Arbitration

    A contract provision that requires the parties to resolve contract ...
  4. Mail Or Telephone Order Merchandise Rule

    A regulation that controls businesses that sell products over ...
  5. Contra Proferentem Rule

    A rule in contract law which states that any clause considered ...
  6. Cumis Counsel

    Legal counsel chosen by the insured when the insurer has a conflict ...

You May Also Like

Related Articles
  1. Investing

    Should Amtrak Be Privatized?

  2. Fundamental Analysis

    The Business Model Of Private Prisons

  3. Investing

    How Nasdaq Makes Money

  4. Investing

    How The NYSE Makes Money

  5. Investing

    Who's Banning Facebook Now?

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!