Tuesday, February 14, 2012


Last week I saw a very interesting presentation by a representative of the OTC Markets Group Inc.  That's the company that runs the world's largest trading market for companies whose stocks are traded over-the-counter (OTC).  OTC companies are not listed on a stock exchange, such as the New York Stock Exchange (NYSE) or Nasdaq.  OTC Markets operates three tiers of trading markets for OTC companies:

  • OTCQX (its top tier);
  • OTCQB (its middle tier); and
  • OTCPink (its bottom tier).
OTC Market competes with OTC Bulletin Board (OTCBB) for quotation of OTC stocks, though a security may be dually quoted on both OTC Market and OTCBB.  According to information provided by the representative of OTC Market, the securities marketplace seems to be moving in OTC Market's direction.  In 2008, both OTC Markets' OTC Link platform and OTCBB each provided about 35,000 quotes.  Today, OTC Link provides about 65,000 quotes, while the OTCBB provides about 5,000 quotes.

The representative of OTC Market seemed to attribute much of their success to the fact that their OTC Link platform is electronic while the OTCBB platform is telephonic, thereby making the OTC Link system more user-friendly.  I don't know if the OTC Link system is truly more user-friendly (I invite any readers who are registered broker-dealers to comment on that issue), but I would note that the OTCBB requires its companies to be current in its SEC reporting obligations under the 1934 Act, while the OTC Market has no such requirement. The OTCBB loses companies on the top end that "graduate" to become exchange-listed companies and those on the bottom end who choose to "go dark" and cease their SEC reporting obligations. OTCQX companies need not be SEC-reporting, but the OTCQX does have requirements regarding asset size ($2 million), revenues ($2 million), minimum share price ($0.10), etc., while the OTCBB does not.

As of today, there are 330 securities quoted on the OTCQX and 2,355 securities quoted on the OTCBB.  

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