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over-the-counter

over-the-counter, method of buying and selling securities outside the organized stock exchange. Unlike an organized stock exchange, the over-the-counter market is composed of dealers who negotiate most transactions by telephone and computer. For the most part, dealers purchase stocks for their own account and sell them to customers at a markup over wholesale prices. Over-the-counter trading represents the single largest securities market in the United States today; it includes almost all U.S. government securities and municipal and corporate bonds, as well as most commercial bank and insurance company stocks. 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.

The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.

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