What is a requirement for brokers and dealers to operate in the Over-The-Counter market?

To operate in the Over-The-Counter (OTC) market, brokers and dealers are required to register with the Financial Industry Regulatory Authority (FINRA). This requirement ensures that they adhere to specific regulatory standards and practices designed to maintain fair and orderly markets. FINRA is responsible for overseeing the activities of its member firms, which includes enforcing rules regarding the conduct of brokers and dealers, monitoring their compliance with securities regulations, and protecting investors.

The OTC market, where many financial instruments are traded directly between parties without a centralized exchange, requires such oversight to mitigate risks associated with less regulated environments. Therefore, registration with FINRA is essential for brokers and dealers to demonstrate their commitment to regulatory compliance and to enhance the integrity of the OTC market.

Registration with other agencies listed is not specific to the operations of brokers and dealers in the OTC market. While the Federal Reserve Board (FRB), the Commodity Futures Trading Commission (CFTC), and other regulatory bodies have roles in the financial system, they do not directly regulate the OTC market participants in the same manner as FINRA.