#1
Which of the following statements best describes the Over-the-Counter (OTC) market?
A centralized exchange where securities are traded publicly.
A decentralized market for trading securities directly between parties.
A market exclusively for institutional investors.
A market regulated by the government.
#2
What is a primary characteristic of the Over-the-Counter (OTC) market?
High liquidity
Standardized contracts
Centralized exchange
Direct trading between parties
#3
Which of the following is NOT a characteristic of the Over-the-Counter (OTC) market?
Decentralized trading
Regulated by a central authority
Direct trading between parties
Less transparency compared to centralized exchanges
#4
What role do brokers play in the Over-the-Counter (OTC) market?
Setting prices for securities
Facilitating trades between buyers and sellers
Issuing securities to the public
Regulating market activities
#5
What is a key difference between the Over-the-Counter (OTC) market and a stock exchange?
OTC market trades only stocks, while a stock exchange trades various financial instruments.
OTC market has centralized trading, while a stock exchange does not.
OTC market does not have standardized contracts, while a stock exchange does.
OTC market allows direct trading between parties, while a stock exchange does not.
#6
Which of the following is an example of an Over-the-Counter (OTC) instrument?
Stocks listed on the New York Stock Exchange (NYSE)
Options contracts traded on a regulated exchange
Government bonds sold on a centralized exchange
Foreign exchange (Forex) transactions between banks
#7
What is the role of market makers in the Over-the-Counter (OTC) market?
To regulate the market by setting prices
To facilitate trading by providing liquidity and quoting bid and ask prices
To enforce compliance with government regulations
To monitor trading activities and detect fraud
#8
What is one reason why companies might choose to issue securities in the Over-the-Counter (OTC) market instead of on a centralized exchange?
To avoid regulatory scrutiny
To benefit from higher liquidity
To access a wider investor base
To have greater control over pricing
#9
Which of the following statements accurately describes the role of regulatory oversight in the Over-the-Counter (OTC) market?
The OTC market is entirely unregulated.
Regulatory agencies play a minimal role in overseeing OTC transactions.
Regulatory oversight ensures transparency and fairness in OTC trading.
OTC market participants are exempt from all regulatory requirements.
#10
In the context of the Over-the-Counter (OTC) market, what does the term 'pink sheets' refer to?
Documents outlining trading regulations for OTC securities.
A system for disseminating stock quotes and pricing information for OTC securities.
Listings of OTC stocks that do not meet minimum listing requirements for major exchanges.
Regulatory filings required for OTC securities issuers.
#11
Which of the following is a potential disadvantage of the Over-the-Counter (OTC) market compared to centralized exchanges?
Greater transparency
Lower trading costs
Counterparty risk
Faster execution of trades
#12
Which of the following is an advantage of the Over-the-Counter (OTC) market for smaller companies?
Access to greater liquidity
Higher listing fees
Reduced visibility to investors
Less stringent regulatory requirements
#13
What is a key difference between trading on a centralized exchange and trading in the Over-the-Counter (OTC) market?
Trading on a centralized exchange requires membership, while OTC trading does not.
OTC trading involves standardized contracts, while centralized exchange trading does not.
Centralized exchanges offer better pricing transparency compared to the OTC market.
OTC trading is limited to institutional investors, while centralized exchanges are open to all.
#14
What regulatory body oversees the Over-the-Counter (OTC) market in the United States?
Securities and Exchange Commission (SEC)
Commodity Futures Trading Commission (CFTC)
Financial Industry Regulatory Authority (FINRA)
National Futures Association (NFA)
#15
What term refers to the process of a company becoming publicly traded on the Over-the-Counter (OTC) market?
IPO (Initial Public Offering)
SEC Registration
Listing
OTC Placement