Many casual investors or investors new to the market imagine that "over the counter," or OTC, stocks trade differently from stocks sold through Nasdaq or a major exchange. While this remains true for a small minority of shares offered by the smallest and often most troubled or speculative companies, selling an OTC stock in the 21st century is generally much the same as selling the stock of a major corporation.
The History of OTC vs. Listed Stocks
Until the end of the last century, an OTC stock was any stock not listed on either the New York Stock Exchange, the American Stock Exchange or the automated quotes system maintained by Nasdaq, the National Association of Securities Dealers. All other stocks were "unlisted," "OTC" or "pink sheet" stocks -- the last of these referring to the pink paper on which these stocks were listed. You bought these stocks, almost all of them offered by troubled or very small companies, through an "over the counter" dealer specializing in them. All this has changed.
Selling an OTC Stock in the 21st Century
The exchange as a physical place where brokers buy and sell stocks is a historical concept. The equity market for stocks exists primarily as data on supercomputers located in New Jersey and in suburbs of large cities worldwide. The former segregation of equities into listed stocks and unlisted stocks is more conceptual than real. You now can sell most OTC stocks through the same online brokers who sell the stocks of major corporations. Although the stocks of some tiny companies are still available only through an OTC specialist, they account for a small minority of OTC shares sold. In general, you sell an OTC stock the same way you would any other, in many cases through an online broker, such as Charles Schwab, TD Ameritrade or Scottrade.
Selling an OTC stock
The process of selling OTC shares you physically hold can begin when you open an online stock account with the broker of your choice. Be sure they handle OTC stocks; a few do not. The home page will invite you to open an account online. You can get more help by telephone. For example, TD Ameritrade has a new client consultant available 24 hours a day at 800-454-9272. A few online brokers require a minimum amount to open an account. Your OTC shares count toward that minimum or may fulfill it. Once you've opened your account, phone or email the brokerage and ask for specific instructions for sending them your OTC stock shares. The process varies slightly from broker to broker but isn't complicated. Alternatively, bring the shares to your brokerage's local office. Once the shares are in your account, you can put in a sell order by phone or online.
Get a feel for what your stock should sell for by following its trading prices on your online broker's website or at the otcmarkets website. OTC stocks have two different listed prices: the "ask" -- the most recent accepted offer to sell -- and the "bid" -- the most recent accepted offer to buy. The difference, known as "the spread," varies in amount depending upon how heavily or lightly the stock is traded. In general, you have sold your stock at a reasonable price if the selling price is within the spread. Get more advice about the process through a representative of your online broker.
- OTC Markets: FAQs for Companies and Investors
- Charles Schwab: Going Global -- Trading Foreign Stocks OTC
- Stockbrokers: Top 10 Online Stock Brokers
- TD Ameritrade: It's Easier to Open an Online Trading Account When You Have All the Answers
- OTC Markets: Market 101 -- Trading
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I am a retired Registered Investment Advisor with 12 years experience as head of an investment management firm. I also have a Ph.D. in English and have written more than 4,000 articles for regional and national publications.