Reply #16: I'm Not That Familiar with Off-Exchange Transactions in General,

[On the Road]

but my impression is they are not used to evade the exchanges so much as for kinds of trading that the exchanges don't offer, primarily:

1) Pre- and Post-Market Trades: If you miss the closing bell and still want to trade, you can generally buy a stock in the after-hours market or before the exchange opens through an ECN.¹ Because the panic happened during the trading day, this is not likely what they were referring to.

2: International Trades: American investors can buy foreign stocks through ADRs ², which are kind of secondary listing foreign companies traded on a US exchange. Perhaps foreign investors do something similar. So some of the trading might have been overseas.

3: Puts and calls: This is likely to be the biggest one. From the Wikipedia article: There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities. ³

So a lot of the people burned are likely to have had puts that suddenly became worthless. (Investors with calls would have cashed in big.) But a lot of index funds like DDM use puts as well, so it's not inherently speculative, and not for rich people only.

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On the other hand, some of the stock symbols like SAM show prices trading as low as $.01, so apparently a lot of these extraordinary losses happened right there on the NASDAQ, NYSE etc, during regular hours.

I guess in general I don't see the term "off-exchange" as something sinister, evasive, or for the super-rich only like the infamous "dark pools."⁴. Some of the people burned were no doubt unsympathetic hustlers, but the methods are part of what a lot of normal investors do too.