What is over-the-counter trading?

[Xanthia Alysha]

When stock is traded on an organized exchange like the New York Stock Exchange (NYSE), there are certain rules and requirements that a company must meet in order to have their stock continue to be eligible to be traded on the NYSE. There is a lot of regulation on exchange-traded stocks.

There are some companies who do not meet the requirements for being traded on the NYSE, and therefore, their stock can only be traded over the counter. There is no regulation over how this stock is traded. For example, I could own a small private business and sell shares of stock to some friends and family. This sale is completely private and not subject to any regulation.