securities to be quoted, the OTC BB and the Pink Sheets. What has separated them in the
past is the notion of better quality on the OTC BB due to to full SEC reporting requirements,
and the wide spread availability of level two quotes leading to better transparency. Today,
however, things have changed dramatically. The Pink Sheets has opened up level II quotes,
and has developed a quality tier system that could end the very existence of the OTC BB in
FINRA owns the OTC BB and has been looking to sell it for some time now, with no bidders.
FINRA wants to reposition itself in the overall OTC markets. It's also worth noting that much
of the content on the OTCBB website is grossly outdated, a pretty weak asset that they are
trying to sell. The number of companies listing on the OTC BB is shrinking dramatically,
despite the now debunked notion of better quality.
Companies that were listed dually
on the OTC BB and Pink Sheets are
seeing market makers pull their
bids from the OTC BB, effectively
delisting them to solely trade on the
Pink Sheets. The reason they are
doing this is not only the fact that the
Pink Sheets is now structured to
quickly evaluate a number of
different levels of reporting
standards encompassing the entire
OTC market, but superior
performance, features and lower
costs are associated with the Pink
Sheets trading platform as well.
So while the OTC BB continues to
wither away, it will be important to
get a feel for the new Pink Sheets
tier system, and find it's OTC BB
counterparts. The Pink Sheets is
starting to lose the Pink Sheets
name in favor of “OTC Markets”.
This is from the website:
for broker-dealers to trade unlisted securities. We organize the OTC marketplace into three
tiers based on the level of disclosure companies choose to provide to investors: OTCQX,
OTCQB and OTC Pink.”
The OTCQX has the highest level of standards going one step beyond requiring companies
to just be current in all of their SEC filings, but adds monetary and quality guidelines. This
level currently only contains around 176 issues. The OTCQB is the middle tier, and where
the bulk of all fully reporting over the counter stocks are and will end up. There are currently
close to 4000 stocks in this venue. The OTCPink is where all the companies that are not
current in their filings end up. Right now there are close to 6,000 securities here, and the
OTCMarkets website divides this group of delinquents into its own sort of sub-tiers.
The OTCPinks are further divided by weather a company is partial reporting, or not reporting
at all. There is a bottom dwelling level as well, the grey market, which includes stocks that
have no market makers. OTCMarkets also lets you know if any stock is being investigated for
fraud or questionable promotion or has liquidity concerns
So from now on, whenever you are researching an unlisted stock, go on over to OTCMarkets.
com and plug in the symbol no matter if it is an OTC BB or a Pink Sheet. There are only 30
stocks that are solely quoted on the OTC BB, so chances are you will gain a more instant and
better level of understanding as to the quality, reporting status, liquidity and fraud potential of
the company than you will anywhere else.
February 28, 2011 PSW Staff
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