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Risk Warning
(Over-the-counter) Not listed or available on an officially recognized stock exchange but traded in direct negotiation between buyers and sellers: over-the-counter stocks. Market in which securities transactions are conducted through a telephone and computer network connecting dealers in stocks and bonds, rather than on the floor of an exchange.
A security traded in some context other than on a formal exchange such as the FTSE. The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network as opposed to on a centralised exchange. It also refers to debt securities and other financial instruments such as derivatives, which are traded through a dealer network.
For the most part, dealers purchase stocks for their own account and sell them to customers at a markup over wholesale prices. Today, most over-the-counter dealing in the United States is done through an extensive computer network, called the National Association of Securities Dealers Automated Quotations (Nasdaq). In recent years, a number of companies that would be eligible for listing on the New York Stock Exchange have opted to remain in the over-the-counter market. In 1998, Nasdaq trading totalled $5.8 trillion, making it the second largest securities market in the world.
Spreadbetting and CFDs are the most popular OTC products traded in the United Kingdom.
Source: Answers.com
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Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily a guide to future performance. Trading in these markets is generally considered to be suitable only for the more experienced investor as it carries a high degree of risk. An investor may not receive back the amount of their original investment and in certain circumstances may be liable for a sum that is greater than their original investment. If in any doubt, please seek independent financial advice.