#1
Which of the following statements best describes the Over-the-Counter (OTC) market?
A decentralized market for trading securities directly between parties.
ExplanationDecentralized trading without a centralized exchange.
#2
What is a primary characteristic of the Over-the-Counter (OTC) market?
Direct trading between parties
ExplanationDirect trading without intermediaries.
#3
Which of the following is NOT a characteristic of the Over-the-Counter (OTC) market?
Regulated by a central authority
ExplanationLack of centralized regulation.
#4
What role do brokers play in the Over-the-Counter (OTC) market?
Facilitating trades between buyers and sellers
ExplanationFacilitators of transactions between parties.
#5
What is a key difference between the Over-the-Counter (OTC) market and a stock exchange?
OTC market allows direct trading between parties, while a stock exchange does not.
ExplanationDirect vs. intermediated trading distinction.
#6
Which of the following is an example of an Over-the-Counter (OTC) instrument?
Foreign exchange (Forex) transactions between banks
ExplanationForex transactions conducted between banks.
#7
What is the role of market makers in the Over-the-Counter (OTC) market?
To facilitate trading by providing liquidity and quoting bid and ask prices
ExplanationFacilitators providing liquidity and price quotes.
#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 access a wider investor base
ExplanationBroadening access to potential investors.
#9
Which of the following statements accurately describes the role of regulatory oversight in the Over-the-Counter (OTC) market?
Regulatory oversight ensures transparency and fairness in OTC trading.
ExplanationEnsuring fairness and transparency through regulation.
#10
In the context of the Over-the-Counter (OTC) market, what does the term 'pink sheets' refer to?
Listings of OTC stocks that do not meet minimum listing requirements for major exchanges.
ExplanationListings for OTC stocks not meeting major exchange requirements.
#11
Which of the following is a potential disadvantage of the Over-the-Counter (OTC) market compared to centralized exchanges?
Counterparty risk
ExplanationRisk of default by trading parties.
#12
Which of the following is an advantage of the Over-the-Counter (OTC) market for smaller companies?
Less stringent regulatory requirements
ExplanationReduced regulatory burden for smaller firms.
#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.
ExplanationMembership requirement distinction between centralized exchange and OTC.
#14
What regulatory body oversees the Over-the-Counter (OTC) market in the United States?
Securities and Exchange Commission (SEC)
ExplanationSEC as regulator of the US OTC market.
#15
What term refers to the process of a company becoming publicly traded on the Over-the-Counter (OTC) market?
Listing
ExplanationProcess of becoming publicly traded.