OTC Markets Newsletter - April 2013

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OTC Markets Newsletter April 2013

An Interview with Neal Wolkoff, Director, OTC Markets Group Board of Directors

This month we bring you an interview with Neal Wolkoff, a member of OTC Markets Group’s board of directors.  A former executive of three exchanges (the American Stock Exchange, NYMEX and ELX Futures L.P.) and attorney focusing on futures and securities markets, exchanges, market regulation, operations and clearinghouses, Neal brings a unique perspective to his role on OTC Markets Group’s board.

OTCM: As the former CEO of the American Stock Exchange, what perspective do you bring to your role as a member of OTC Markets Group’s Board of Directors?

NW: I was and am an avid proponent of the development of small cap companies, as well as an advocate for regulations that distinguish between a start-up and a Fortune 500 company.  At Amex, we were instrumental in reviving the Special Purpose Acquisition Company over enormous regulatory hurdles because we believed that emerging companies should have the maximum number of opportunities to raise capital.  OTC Markets Group is an incredibly creative group of marketplaces.  As a member of OTC Markets Group’s board of directors I am able to use my knowledge of market structure and regulation to add value to help this innovative organization provide companies of many sizes and stripes access to investors and market liquidity in a unique, value-add platform.

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OTCM: A growing percentage of U.S. equity trading volume is taking place away from stock exchanges on various broker-dealer systems and crossing networks. How do you believe this trend of networked markets ultimately impacts the equity trading market?

NW: As a former exchange leader, you might expect me to join in a full-throated condemnation of dark venues. Indeed, some of them concern me because of a lack of disclosure, and an association with a single, large broker-dealer. However, for many institutional investors, accessing liquidity in as many forums as possible, and at low cost, is as critical today as when we had trading floors and floor brokers who provided a similar “dark” function. I am a proponent of a data driven study to develop a much clearer understanding of the impact of dark markets on lit markets, and the development of a set of best practices to assure uniform oversight, disclosure and transparency for these alternative venues, as well as to assure the integrity of the price discovery function of the securities markets.

OTCM: There has been a lot of discussion about the role high-frequency trading plays in equity markets today. Are electronic market makers providing liquidity in markets? Do they make markets more efficient or more volatile? How can this type of trading improve the investor experience?

NW: Once markets migrated from floor to electronic venues, it was natural that liquidity providers would develop electronic means of providing the benefits of what they do. As a general matter, high frequency traders provide an essential service to the markets, and allow for efficient, liquid markets to provide the benefits to investors and issuers. From time to time, I am troubled by the enormous quote rates without executions and hope that regulators are aware if quote traffic is intended to disrupt, rather than enhance, markets. Again, I would like to see a data driven study to determine whether an excessive “quote tax” might be appropriate as a means to control potentially unproductive conduct. To be clear, I vehemently oppose a transaction tax. After all, aren’t actual trades the best form of liquidity, and shouldn’t we avoid discouraging executions on American execution venues?

OTCM: Congress passed the JOBS Act last year with the goal of removing impediments to small company capital raising. How important do you think the JOBS Act will be for increasing access to capital for small companies? When will we see the full effects?

NW: The JOBS Act has enormous positive potential for enhancing developing companies’ access to capital. Importantly, at least for new “Emerging Growth” companies, the Act provides needed relief and clarity from some of the heavier-handed regulations under Sarbanes-Oxley and other regulations. In fact, I would like to see consideration given to extending some of the JOBS Act benefits to existing small cap issuers. Providing small companies with easier access to research coverage, moving toward a change in minimum tick sizes to incent liquidity providers, and allowing small companies greater control over when or if they should go public are all very positive aspects of the Act. I think it is incumbent on regulators to oversee compliance with disclosure requirements and the marketing of securities with the goal of making the JOBS Act work.

OTCM: The SEC is considering holding a pilot program to increase the minimum tick size for small-cap companies as a way to promote the trading of small public companies. Do you believe this effort will improve the quality of markets for small-cap companies?

NW: If minimum tick sizes are set at 5¢ or 10¢ rather than the current penny, the goal would be to attract participation of competing market makers to display greater depth in a small cap issue than currently exists. As with any pilot, it will be key to continually analyze the data to determine whether investors are indeed seeing deeper, more liquid available order books. In addition, in order to incent the participation of market makers, the opportunity for competitors outside the lit markets to offer price improvement between the ticks should be permitted, but only if the price improvement is meaningful. Price improvement of one-hundredth of a cent is to me not meaningful, and should not frustrate a market maker posting bids and offers at the minimum tick increment. Tick size increments may not be the panacea for liquidity troubles at every small company, but for those that can develop an investor following, I believe it will help significantly. Hopefully, a pilot program will last sufficiently long (a 2 year program I believe is appropriate) to allow for the program to attract market makers, and for the market to have data necessary to evaluate the effectiveness of the program.

OTCM: What type of market structure would most benefit small-cap companies in terms of liquidity, access to capital, visibility and increased investor confidence?

NW: That is the million dollar question. I believe the efforts underway to improve the regulatory requirements for emerging growth companies are very positive, but I also believe that successful small cap companies will be the ones which honor the highest standards of disclosure to win the confidence of investors. How specifically a stock is traded and under what mechanical scheme it trades should be of little importance to the small issuer. Macro concerns like a flash crash consume regulators, but are these occasional market disruptions really significant to your company? How you grow your business, whether you register as a public company and list on an exchange are all questions that should be carefully evaluated by the growing business. There is no one answer for every company.

OTCM: What advice do you have for the thousands of small-cap companies looking to grow their investor base?

NW: Maintain high standards of disclosure, worry more about informing prospective investors about your business than maintaining absolute secrecy when unnecessary to preserve a meaningful competitive edge, and put in the effort necessary to explain over and over again to prospective investors the terrific story that prompted you, the entrepreneur, to turn your life upside down to do this.

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Newsletter Sponsors

Nash Global Media, LLC. Scottsdale Capital Advisors

Monthly Trade Summary — March 2013

OTC Marketplace # Securities* Monthly Dollar Volume Monthly Dollar Volume
per Security
Aggregate Market Capitalization
(in Millions)*
OTCQX® 370 $2,539,967,299 $6,864,776 $1,298,946
OTCQB® 3,384 $5,436,531,393 $1,606,540 $178,680
OTC Pink® Current Information 2,702 $6,259,820,412 $2,316,736 $11,495,934
OTC Pink Limited Information 471 $102,543,795 $217,715 $6,495
OTC Pink No Information 3,080 $1,018,717,442 $330,752 $34,809
Totals 10,007 $15,357,580,341 $1,534,683 $13,014,864
* Selected data as of March 28, 2013.

Events & Sponsorships

OTC Markets Group has attended or will attend the following events to educate investors, broker-dealers, and OTCQX, OTCQB and OTC Pink companies about our marketplaces.

Marcum MicroCap Conference (May 30, 2013)

14th Annual B.Riley & Co. Investor Conference (May 20-22, 2013)

NY Tech Day (Apr. 25, 2013)

STANY’s 77th Annual Conference and Dinner (Apr. 25, 2013)

ACA Summit (Apr. 17-19, 2013)

The Investment Traders Association (Apr. 11-12, 2013)

LDJ Capital’s The Soho Loft Innovative Investing Symposium in partnership with Thomson Reuters PartnerConnect (Apr. 5, 2013)

25th Annual ROTH Conference (Mar. 17-20, 2013)


Contact us if you are interested in meeting us at one of these events.

News & Updates

Deregistered and Delisted? No Worries. - CFO Magazine (Apr. 2013 issue)

TradeMonster Gobbles Up OTC Markets Data - Inside Market Data (Mar. 26, 2013) (subscription or free trial registration required)

Update: Wolverine, SNL, SIX Add OTC Markets Data - Inside Market Data (Mar. 26, 2013) (subscription or free trial registration required)

SEC Favors Pilot to Vary Tick Sizes for Small Stocks - Bloomberg News (Mar. 22, 2013)

Brace for JOBS Act aftershocks - Inside Investor Relations (Mar. 17, 2013)

Edison Investment Research’s Report on OTCM - Edison Investment Research (Mar. 2013)

Product Updates


OTC Markets Group has updated the OTC Market Report, a snapshot of a security’s market performance, to provide enhanced weekly trading data, additional Blue Sky Compliance profile data, and monthly share volume by broker-dealer. Delivered weekly via email to designated executives, the report is designed to be easily redistributed to a company’s board of directors, management team, and shareholders. The OTC Market Report will be available to all OTCIQ subscribers, including those who use the recently introduced OTCIQ Basic service.


OTC Markets Group has introduced OTCIQ Basic as a free Investor Relations service to help OTCQB and OTC Pink companies that are at the very early stages of their investor engagement to better serve their investors. Click here to learn more about OTCIQ Basic.

Market Data Updates

•   SNL Financial is offering enhanced investor relations solutions to OTCQX, OTCQB and OTC Pink companies; OTC marketplace designations will be displayed on all SNL platforms.
•   Markit Group Limited now incorporates the OTC Markets Group RSS feed into its platforms.
•   Microsoft Corp. will incorporate OTC Markets Group’s delayed Level 1 quotes into its new Bing Finance app for Windows 8.
•   Success Trade will soon offer OTC Markets Group Level 1 and Level 2 quotes to its customers.

OTC Markets Regulation & Compliance

Updates from FINRA

Effective May 9, 2013, FINRA has announced SEC approval of amendments to FINRA Rule 6440, related to trading and quotation halts in OTC equity securities. More information can be found by clicking here.

OTCQX - New Additions

4 new companies joined OTCQX in March:

A complete list of OTCQX companies is available on www.otcqx.com.

Our Marketplaces

The Best Marketplace with Qualified Companies

The Venture Stage Marketplace with U.S. Reporting Companies

OTC Pink
The Open Marketplace with Variable Reporting Companies

For questions, please contact OTC Markets Group.
www.otcmarkets.com • 212-896-4420 • info@otcmarkets.com

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© 2013 OTC Markets Group Inc.