OTC Securities Market OTC Pink Sheets - electronic exchange, on which shares are sold and bought. On the market OTC Pink Sheets no marketplaces, all quotations are carried out in electronic form. Since there is no central platform (trading floor) as for example on NYSE, companies traded on pink sheets (Pink Sheets) also do not have specific criteria, which would allow you to select reliable companies for trading. In this article, we will tell, what is Pink Sheets, what they hide the likely profits and risks.
The OTC Bulletin Board or OTCBB in the United States is stocks of companies not listed on NASDAQ, NYSE or other national marketplaces. Over-the-counter (OTS) translated as over-the-counter. There are also various types of TUT: OTCQX, OTCQB and Pink Sheets. Deception and manipulation are common among OTCs.
OTC shares are often unpredictable and regulated by the SEC, securities regulatory commission, national stocks and option trading platforms, and other securities markets in the United States. FINRA,private corporation acting as the self-regulating organization of the securities markets, which works and provides regulatory services of OTC. Almost all companies represented on OTC are in a pre-bankruptcy state. OTCQX OTCQX is the most prestigious level in OTC. To be in the OTCQX, companies must earn trust.
OTCQX includes OTCQX U.S., OTCQX U.S. Premier and OTCQX International. OTCQX U.S. Premier companies must have 2 million dollars in assets, but the stocks may be worth 0.10 Cents. OTCQX International includes foreign companies. OTCQB OTCQB companies must fully report on their activities. OTCQB does not have any clear qualifications for assets, income or share prices. Stocks may be worth 0.0001 cent.
Shares of OTCQB companies can trade in this category as long as the companies meet all the requirements otherwise they move to the Pink Sheets category.. The decision depends on the SEC commission. Pink Sheets Pink Sheets are not registered with the SEC and have no reporting obligations. OTC encourages companies in this category to provide any reporting, but it's not necessary. You can find the Russian company Lukoil with the ticker LUKOY presented in this category. In order to qualify as Pink Sheets, companies must complete one unudited report each year., three quarterly reports and notification of various corporate events.
Pros and Cons For many merchants, OTC gives the optimal application for their money. For many, the choice in the direction of OTC is obvious when compared between buying one Apple stock on 400 dollars and 8,000 shares of COMPANIES THS by 0.05 cent. GVAC stocks can often make big rallies., which is excellent for traders with very little capital. Don't forget, that stocks from OTC markets are very risky: lack of transparency, illiquidity, possible deception and many other existing dangers.
OTC is often subject to promotions when you receive a message with a new ticker of the company by mail or update the promoter's page in 9.30 and hurry up to buy shares of the company that the promoter puts up. Promotions can be paid and not paid. When ticker the shares have been paid for, which means someone needs to get rid of the shares of this company and the shares will be heavily sold to those who are in a hurry to buy them at the opening. When the ticker of the stock is not paid, the probability of a good run is very high.- the main thing is to buy quickly and sell quickly. There is also a risk that trading may be suspended due to deception and manipulation..
The SEC or FINRA may initiate legal proceedings against a company subjected to deception and manipulation. After that, the company caught in the field of suspicion can go to Grey Market., gray market, from where there is practically no return. The gray market puts an end to the company. OTC shares can be excellent trading tools that provide great opportunities for earnings. OTC can also cause more harm to the deposit without knowledge of trading and other nuances.. Recent successful examples of shares from the OTC market AAMRQ, FNMA, FMCC showing good results and giving hope for greater growth, which is most likely an exception to the rule in the OTC world.
Companies traded on pink sheets do not have any strict requirements, for what to be listed on the exchange. They basically need to provide a form. 211, for OTC Compliance Unit (NASD Compliance Department). This is usually done on behalf of the market maker company.. The form must have current financial information.
Pink Sheets companies traded on the OTC exchange often have a very small capitalization, and also have a very thin schedule. Most of these companies do not file annual or quarterly reports with the Securities and Exchange Commission. (SEC). What can negatively affect investors, since they do not receive real information about the company.
OTCBB and Pink Sheets
You may have come across the term “OTSVV”, which means OTC market electronic bulletin boards (Over-the-counter bulletin board, OTCBB). OTCBB is a similar over-the-counter market on Pink Sheets. But Pink Sheets is a private company., and OTCBB is owned by NASDAQ. Another difference is that, that there are strict standards in the OTCBB market. OTCBB issuers must register with the SEC.
Advantages and disadvantages, related to Pink Sheets
The biggest advantage of Pink Sheets is their low cost.. Many of them cost less than one dollar.. Because of this, even a movement of one cent can bring great returns for the investor.. Another advantage of Pink Sheets is the presence of once strong companies, which were subsequently defeated. So let's say the company, which used to be on the NYSE, and was subsequently deleted for non-compliance, may be a good option for the investor.
Another advantage of Pink Sheets is their new classification or risk differentiation system.. This classification helps to stay away from high-risk companies..
Shouldn't be forgotten, that there are also many disadvantages for investors. Primarily, this is limited information. Companies placed on Pink Sheets are not required to provide financial statements. This state of affairs can make it difficult to understand where you are investing money..
Also, many companies are thin. (illiquid). So what if you made a profit, if you can't fix it. To fix the profit you need to sell previously purchased shares, and in such actions are not rare cases, when there is no suitable buyer (Bid-ask spreads are very high).
Risk differentiation system for Pink Sheets shares (The Pink Sheets Tier System)
Risk Level System, created to structure companies according to their investment risk. Each level gives the investor an idea of, which companies he buys.
Reliable level (Trusted Tier)
The first level contains international and American companies, which, according to Pink Sheets OTC, are trustworthy and more attractive to investors.
International Premier QX: These companies are based abroad and listed on international exchanges., and they continue to meet the financial requirements of the NYSE Worldwide Listing Standards. Companies must have an independent audit, and certified CEO. Such companies, although listed on international exchanges, but they must provide written notice of corporate governance practices to the NYSE.
Premiere QX: U.S. companies that have just begun the process of listing the standard in Nasdaq’s Capital Market. Companies follow all NASDAQ requirements.
Transparent level (Transparent Tier)
This level is lower, than Reliable and consists of:
Pink Quote OTCBB: These companies are traded on two exchanges., на pink sheets и на OTCBB. OTSVV is required of these companies to report to the SEC.
OTCBB Only: Companies that are represented only in the OTSVV market.
Up-to-date information: companies provide information to the SEC or OTC Disclosure and news service. The information is updated at least every six months.
Problem level (Distressed Tier)
This level is not for the faint of heart..
Limited information: They have information, which is available to the general public, but this information is more than six months old. Companies registered with the SEC, but have not updated their data. Companies, who went bankrupt also on this list. These newly bankrupt companies are required to submit information to the OTC Disclosure.
Dark or endangered level (Dark/Defunct Tier)
There are two types of companies, who will fall into this pit.
1Type of companies: formally existing companies, who do not submit information to the SEC or the OTC Disclosure. With these companies, you have to be very careful..
2Type of companies: gray market companies. Companies in this category do not have a market maker. These companies are not listed by OTSVV and Pink Sheets. Trades in this category are through a broker-dealer and are self-regulating.
Poisonous level (Toxic Tier)
This level advertises its extreme degree of risk., having a skull symbol with crossed bones. There is only one category in this group:
Companies that send spam, engaged in dubious promotion. It's either scammers., or no longer a company.
The biggest plus of Pink Sheets is their low price.. Trading such shares, you should have a good understanding of risk and potential. Worth understanding, that there is a possibility of loss of all investment capital.
Pink Sheets OTC market is growing rapidly. THE OTC market has made a special level system for risk assessment, which undoubtedly helps investors in many ways.
OTC bulletin board (Over-The-Counter Bulletin Board – OTSVV) – this is a paid service for traders, which is provided by the National Association of Securities Dealers (NASD). This service provides traders and investors with real-time quotes, prices of the last sale and information about volumes for trading securities outside the main exchanges. All companies, registered on this system, must provide current financial statements to the U.S. Securities and Exchange Commission, or regulators. Unlike listing on the Nasdaq and the New York Stock Exchange (NYSE), there are no listing requirements on THE OTCBB.
Over-the-counter bulletin board started its activities in 1990 one year after the approval of the "Penny Stock" reform law. "Penny Stock" reform provided for, that the SEC was to develop some type of electronic stock quote system, which cannot be listed on any of the largest exchanges in the world. Individuals trade these shares outside the market, using computers and phones. Promotions, traded outside the exchange are marked with a prefix “.OB”.
When investing in OTCBB shares, investors should consider, the fact that these shares do not belong to any of the major exchanges. Trading volumes for such shares are insignificant, these stocks are known for their instability and high risks. Not all OTCBB shares successfully move from the OVER-the-counter market to the NASDAQ or other major exchange., because they can't meet the listing requirements. Such promotions, as a rule, not liquid, are rarely traded and have a large bid-ask spread.
The OTC market is a great opportunity for small companies, who cannot declare themselves on the main stock exchanges, because they do not meet the listing requirements. Traders, who decided to invest capital in OTCBB shares, important to remember, that the OTC Bulletin Board is not actually a full-fledged exchange. It's just a paid service.. All securities declared on the OTC bulletin board, in fact, traded through a network of market makers, which indicate various quotes and make transactions through a secure computer network, available only for subscribers.
In some cases, even you can act as a market maker.
Very often, beginners do not distinguish between an over-the-counter bulletin board and "Pink Sheets". Actually, they're two different things. "Pink Sheets" is a private company, which provides its own quote system. Besides, investors should not file reports with the SEC or provide the public with any financial documents. It is thanks to this anonymity that the Pink Sheets share trading scheme becomes the choice of small companies..
Over-the-Counter OTC Market (OTC)
OTC Bulletin Board (OTCBB) - NASD electronic bulletin board, which exists with 1990 of the year. Belongs to the so-called unorganized OVER-the-counter markets (in contrast to the regulated secondary securities market NASDAQ). The idea of over-the-counter trading is direct sales of securities between two parties..
OTC market Is a secondary decentralized securities market, in which geographically dispersed dealers communicate with each other by telephone or through a computer network.
OTSVV provides access to more than 3300 securities, including hundreds of shares of foreign issuers in the form ADR first level. A feature of OTCBB is the fact, that only a registered market maker can trade (there are more than 200). The main difference from another type of unorganized OTC markets – Pink sheets (Pink Sheets) - in that, that OTSV companies belong to the so-called reporting companies, that is, they are required to submit regular reports to U.S. supervisory authorities., including auditing.
Pink sheets (Pink Sheets)
«Pink sheets» (Pink Sheets) - electronic trading system, existing with 1904 of the year. Currently supported by New York-based firm Pink Sheets LLC. Reflects broker/dealer quotes for OTC securities (OTS). With 1999 The Internet works for a year – electronic trading version. The system has nothing to do with the NASD and sec.
"Pink Sheets" are published daily by the Bureau of National Quotations (NQB) Jersey City, state of new jersey, Commerce Clearing House Inc., Riverwood, Illinois. A list of companies is released daily, which includes names and phone numbers, brokers and stock quotes. The information is printed on thin pink paper sheets – hence the name. Mostly, companies, which are quoted on "pink sheets" - these are closed and small, who cannot meet the requirements of listing on the NYSE or NASDAQ. Companies do not need to provide reporting and auditing. This causes some difficulties for investors with their assessment., which leads to a high degree of investment risk. There are no minimum requirements for the size of the business.