What is the decentralized market for unlisted securities where dispersed dealers connect via phone and computers called ?
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Answer: B. Over-the counter (OTC)
Explanation
The over-the-counter market is a decentralized network where dispersed dealers connect electronically or by phone. Trades occur directly between two parties without the supervision of a centralized physical stock exchange floor. This market structure provides liquidity for securities that do not meet the listing requirements of major exchanges. Over-the-counter trading handles massive volumes of corporate bonds, foreign exchange, and derivative contracts. Electronic communication networks have largely replaced traditional telephone negotiations in modern OTC markets. Lack of centralized clearinghouses can introduce higher counterparty credit risks compared to organized exchanges.
Regulatory reforms following financial crises have increased transparency requirements for over-the-counter derivatives. Small cap companies and innovative startups often issue shares on OTC markets before moving to major exchanges. Global currency trading occurs almost entirely through decentralized over-the-counter dealer networks. Grey markets involve unauthorized distribution channels rather than formal decentralized securities trading networks. Open market operations refer to central bank purchases and sales of government securities for monetary policy. Back market is an informal term sometimes used for illicit trade rather than legitimate financial markets.
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