Definition of ‘Unlisted Security’
A financial instrument that is not traded on an exchange, but through the over-the-counter (OTC) market. Unlisted securities are also called OTC securities. Market makers facilitate the buying and selling of unlisted securities in the OTC market. Because they are not exchange traded, unlisted securities can be less liquid than listed securities.
Securities must meet a number of requirements to be listed on an exchange. For example, to be listed on an exchange such as the NYSE or AMEX, a publicly traded stock must represent a company that surpasses an annual income or market capitalization threshold. The company also must have issued a specific number of shares and be able to afford the exchange’s listing fee, which often exceeds $100,000. These requirements ensure that only the highest quality companies trade on exchanges. Thus, unlisted securities may be of lower quality and present a greater risk to investors.