Can you trade stocks outside of stock exchanges?

Stock exchanges seem kind of redundant in this day and age where neither you nor your broker physically go and buy or sell shares. In the past it was possible to buy and sell physical stock certificates directly from a seller or to a buyer, as far as I know. Is that still possible? Is there a digital marketplace which lets you trade directly and cut out exchange fees?

Hi there,

Whether or not you can trade securities without using the services provided by stock exchanges depends primarily on the kind of securities you plan to trade.

Securities which can be traded outside of a stock exchange are known as over the counter (OTC) securities. These may include stocks in certain companies, but are tyically other types of securities including derivatives, futures or options.

Some companies sell shares directly to investors via a direct stock purchase plan or through a transfer agent. In some cases, shares transacted directly between two parties (a seller and buyer) can be registered in the new owner's name directly on the company's share register.

However, trading in many major stocks requires the services of a broker and a stock exchange. Stock exchanges also provide more security because they guarantee that both parties fulfil their end of the bargain.

Best regards from Moneyguru

More on this topic:
Interactive Swiss stock broker comparison