An unlisted security is a financial instrument that is not traded on a formal exchange because it does not meet listing requirements. Trading of unlisted securities is done on the over-the-counter (OTC) market and they are often called OTC securities. Market makers, or dealers, facilitate the buying and selling of unlisted securities on the OTC market.

Unlisted securities are usually issued by smaller or new firms that cannot or do not wish to comply with the requirements of an official exchange, such as market capitalization thresholds or listing fees. Furthermore, because they are not exchange traded, unlisted securities are often less liquid than listed securities. Unlisted stock can be tracked via pink sheets or on the Over-The-Counter Bulletin Board (OTCBB).

Securities must meet a number of requirements to be listed on an exchange. For example, to be listed on the New York Stock Exchange (NYSE), 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.1

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.