Over-the-counter or pink sheet stocks are stocks that are traded in a fashion other than through formal exchanges such as the New York Stock Exchange or Nasdaq, reports Investopedia. These stocks are traded in individual dealer networks, are termed unlisted and are commonly bought and sold on the Over-The-Counter Bulletin Board.Continue Reading
These stocks are usually not listed on the major exchanges because they have failed to meet certain requirements enforced by these exchanges, according to Investopedia. As such, they are traded directly from broker to broker by phone or through the Internet. Investors should be wary when dealing with over-the-counter or pink sheet stocks because often they are stocks from very small companies, are offered as penny stocks or are part of companies with shoddy credit.
These stocks are also known as pink sheet stocks because the daily publication that listed the bid prices and ask prices of over-the-counter stocks put together by the National Quotation Bureau was originally printed in pink sheets, recounts Investopedia. Currently such stocks are easy to define by their listings, which end in ".PK." Other financial instruments such as bonds are not traded on the major exchanges either, and they are known as over-the-counter securities.Learn more about Investing