OTC Markets: what it is and how over-the-counter trading works

US OTC (Over-The-Counter) markets are primarily operated by OTC Markets Group. Unlike centralized exchanges, OTC securities do not pass through a single order book: trades occur between broker-dealers and market makers through systems such as OTC Link ATS. The market is organized into tiers with increasing requirements toward the bottom. OTCQX represents the highest tier, with stricter disclosure standards. OTCQB is the venture market for growth companies. Pink Open Market has minimal requirements and is where most penny stocks trade. For retail investors, trading OTC usually means using a broker that supports these markets (Interactive Brokers, Fidelity, Schwab and others). Limit orders are essential: liquidity is often low and bid-ask spreads can be very wide. Before investing, always check the security profile on otcmarkets.com: tier, last price, volume, disclosure status and any caution flags.