OTC Markets. Registered with the SEC as a broker-dealer, OTC Link is also an alternative trading system (ATS). OTC Markets. By using Investopedia, you accept our. OTC Markets are divided into three tiered markets: OTCQX is the highest quality-controlled tier for meeting ongoing financial and disclosure requirements. Analyzing OTC Pink stocks is an extremely important component of making investment decisions. There are more than 10,000 stocks trading on the OTC markets. Your input will help us help the world invest, better! Much information can be gleaned from conversations with management teams, and determining the strength of the team while following your “gut” in whether to trust the company is invaluable. The OTC Pink, now branded as the Pink Open Market, is the lowest and most speculative tier of the three marketplaces for the trading of over-the-counter stocks.

The pink sheets, also known as the over-the-counter (OTC) market, are a stock quotation service that allows companies not listed on a major stock exchange to trade. SEC reporting standard in which companies are in compliance with their SEC reporting requirements. Alternative reporting standard, which is used for companies that do not follow SEC filing but still need to publish basic information to be listed according to Exchange Act Rule 15c2-11.

There are three levels based on degree and timeliness of available information.

Playing in speculative stocks can be both frightening and extremely rewarding. Pink sheets refer to a listing service for stocks that trade over-the-counter (OTC). For example, there are many larger foreign companies that list on the OTC market in order to avoid filing with the SEC. Pink sheet companies are not usually listed on a major exchange. The OTC Pink offers a variety of investment candidates including many good companies waiting to be discovered. The pink sheets, also known as the over-the-counter (OTC) market, are a stock quotation service that allows companies not listed on a major stock exchange to trade.

The company that runs the pink sheets has changed its name several times over the years and is currently called OTC Markets Group, although investors generally still use the "pink sheets" name when referring to the exchange or to the stocks that trade on it. Because these companies, in one way or another, have more limited disclosures than the ones filed with the SEC, contacting company management is a critical component to analyzing the business operations and stock potential. Definition and History, How Penny Stocks Trade and How Investors Can Buy Them, A Review of Pink Sheet Stocks and How Investors Can Trade Them, tiering companies based on level and timeliness of information, Pink Sheets LLC Announces Name Change to Pink OTC Markets Inc, 2010 Annual Report -- Issuer's Equity Securities: Common Stock. Catalysts can include any positive news that may propel the stock higher such as a pending legal announcement, a clinical trial, the release of past-due full financial information at the conclusion of an accounting review, a new product, or pending merger or acquisition activity. Since it has no disclosure requirements, categorization of OTC Pink companies is from information provided by the company. Further, they must register with the SEC and are subject to state securities regulations.

OTC Markets Group Inc. The Securities and Exchange Commission (SEC) does not regulate the pink sheet filing requirements. OTC Pink is the lowest tier of the three marketplaces for trading over-the-counter stocks provided and operated by the OTC Markets Group. Let's conquer your financial goals together...faster. These companies either have no disclosure of information, or the released information is more than six months old. "2010 Annual Report -- Issuer's Equity Securities: Common Stock," Page 3. In September 1999, the NQB introduced the real-time Electronic Quotation Service. The OTC Markets Group is the owner and operator of the largest U.S. electronic quotation and trading system for over-the-counter (OTC) securities. The marketplace trades a wide range of domestic and foreign companies including penny stocks, shell companies, distressed companies, and dark companies that cannot or will not provide company information to investors. OTC Pink is the lowest tier of the three marketplaces for trading over-the-counter stocks provided and operated by the OTC Markets Group. Unlisted stocks that trade over-the-counter can potentially provide the huge “pop” investors desire, but there are many landmines are along the way. See you at the top! Sure. OTCQX is the top tier of the three marketplaces for trading over-the-counter stocks provided and operated by the OTC Markets Group. The difference in the three levels is denoted by the volume and quality of information provided to investors. A name change occurred in 2008 from Pink Sheets to Pink OTC Markets, and again in 2011 to the current name of OTC Markets Group.. This means securities that trade on the OTC Pink have broker-dealers who must communicate and trade directly with each other. OTC Link allows broker-dealers not only to post and disseminate their quotes but also to negotiate trades through the system’s electronic messaging capability. Technical analysis may be extremely limited and difficult given the nature of the trading and quotation service, since there is no central "exchange" for the securities. We'd love to hear your questions, thoughts, and opinions on the Knowledge Center in general or this page in particular. Phone. Therefore, not getting “blown up” is critical to achieving a huge portfolio return. These securities do not meet the requirements to have a listing on a standard market exchange. The offers that appear in this table are from partnerships from which Investopedia receives compensation. We also reference original research from other reputable publishers where appropriate. But there are also some worthless companies. 212-896-4400. For instance, a company undergoing an extensive accounting review may fall on the OTC Pink because it lacks audited financials. However, with the notable exception of major foreign companies for which there is substantial information available elsewhere, it's generally a good idea to avoid investing in any stock that doesn't have any financial or disclosure requirements to adhere to. Common stock is a security that represents ownership in a corporation.
Email us at knowledgecenter@fool.com. This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors. The daily bid-ask paper quotes were eventually replaced, giving broker-dealers the capability to electronically trade and quote prices, so the term Pink Sheets no longer appropriately described the quotation system. OTC Pink provides for transparent trading and best execution, although there are no financial standards or disclosure requirements.
Instead of providing an order matchmaking service like the NYSE, these dealers carry inventories of securities to facilitate any buy or sell orders.

The pink sheets market gets its name from the fact that its stock quotes used to be published on pink paper, though trading has since gone electronic. The OTC Pink, as well as its companion tiers, OTCQX and OTCQB, is run by OTC Link.

NQB was owned by CCHfrom 1963 to 1993. This tier is used for companies with financial reporting issues, companies in bankruptcy or economic distress, as well as companies unwilling to meet the OTC Pink Basic Disclosure Guidelines. This helps investors steer clear of the defunct and toxic companies that are often no more than scams. The last tier, OTC Pink, is the lowest, “speculative” market tier. Some companies simply aren't big enough or aren't practical to list on the NASDAQ or NYSE. The Securities and Exchange Commission (SEC) does not regulate the pink sheet filing requirements. One problem that may be encountered is that this information may not be uniformly presented or available, so some legwork is necessary to put it all together. The link is an electronic inter-dealer quotation and trading system developed by OTC Markets Group. Their securities should be considered highly risky.


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