OTC Markets Newsletter
OTC Markets Group News July 2014
Why You’ll Only Find OTCQX and OTCQB Securities On Our Home Page
A Letter from OTC Markets Group President and CEO R. Cromwell Coulson

You will soon notice changes to our homepage at OTCMarkets.com. Most importantly, you will see we feature only OTCQX and OTCQB securities in the Current Market Activity section and in the news releases, financial reports and videos feeds of our homepage. News releases, financial reports and videos for OTC Pink companies will still be available on the quote pages of individual OTC Pink securities and in the OTC Pink Market Activity and News sections of our sites.

Our homepage is the front door to our website and we want to share it with companies that embody our values of being open, transparent and connected. OTCQX and OTCQB companies have made the important investment to be open by providing thorough transparency to their investors and being connected to their U.S. trading market. While every market has some speculation and risk, the most efficient financial markets require the commitment of companies to widely share their current information so investors can intelligently analyze, value and trade their securities.

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The OTC Pink marketplace serves an important function of allowing broker-dealers to get their customers the best price in all types of securities, yet investing in OTC Pink companies has always required more digging and due diligence on the part of investors. OTC Pink is an open marketplace, so OTC Pink companies can choose to provide less timely or consistent news and disclosure to investors than OTCQX and OTCQB companies. OTC Pink also includes foreign companies that choose not to release news under their U.S. traded symbol or to distribute disclosure outside their home markets. OTC Pink companies are more likely to have lower disclosure standards, fewer financial controls or to be in economic distress or bankruptcy – all reasons why broker-dealers place more restrictions around trading opaque and risky OTC Pink securities.

Adventurous global investors and those with the patience and sophistication of a young Warren Buffett or Bill Ackman may profit from these information gaps and price inefficiencies, but other investors should proceed with care and only after extensive sleuthing and fundamental research of financially distressed, disconnected or “dark” OTC Pink companies. With OTC Pink, it is every investor’s individual responsibility to further research the companies to separate worthwhile investments from questionable speculations.

OTCQX and OTCQB companies, in contrast, deserve the spotlight for being more transparent and better connected to their investors and brokers. OTCQX, our best marketplace, is where investors can find established U.S. and international corporations that have met our high financial standards and reporting requirements and have third-party sponsorship. This includes global blue-chip companies like Roche Holding AG, Heineken N.V. and Shiseido Company Ltd. , as well as several U.S. community banks and more established U.S. and global growth companies like Computer Services, Inc. and Starpharma Holdings, Ltd. These companies represent the “cream of the crop” of our market in terms of investor openness and transparency.

Meanwhile, OTCQB is becoming a better venture stage marketplace where investors can discover early and developing companies that are current in their reporting and have met certain minimum standards and eligibility requirements. While verified OTCQB companies may not qualify for the high financial standards of OTCQX, they have met a minimum one penny bid price test and voluntarily disclose additional information about their management, advisors and share count to investors. Many verified OTCQB companies aspire to be an OTCQX or U.S.-exchange-listed company someday.

The next time you visit our homepage at OTCMarkets.com, take time to peruse the trading activity, news and videos of some of our open, transparent and connected OTCQX and OTCQB companies. And if you’re determined to dig deeper to research an OTC Pink security, it’s only a click or two away.

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Get to Know Your Community
[photo]Interview with Christopher Kearns, CEO - Depositary Receipts, BNY Mellon

This month, we speak with Christopher Kearns, CEO of Depositary Receipts at BNY Mellon, a leader in the global depositary receipt market. Mr. Kearns speaks with us about how international companies can leverage OTCQX to build visibility and access to U.S. investors and about collaborating on the launch of the new OTCQX ADR 30 Index to highlight the liquidity that is available on the OTCQX marketplace. He also explains why new regulatory proposals that may permit Indian companies to create Level 1 ADR programs on our marketplaces would provide greater opportunity for investors interested in international securities.

OTC Markets Group (OTCM): BNY Mellon has 60% market share of the global depositary receipt (DR) market. Why do companies continue to choose BNY Mellon as their depositary bank?

Christopher Kearns (CK): We became the leader in the DR market worldwide for the same reasons we maintain the trust of most of the world’s issuers with DR programs: our working partnership with our clients and dedication to their success plus our experience and efforts to influence the development of DRs worldwide. DRs are a primary business for BNY Mellon—we are in it for the long term. We are able to work with all parties in the investments marketplace equally, so I would say that, as a result, we are unmatched in connecting issuers, brokers and investors to the world’s capital markets.

It’s a testament to our people, who work closely with the full range of the investment community around the world, that we inspire the trust of our clients and attract new issuers. We’re not resting on our laurels; we have welcomed several Chinese issuers to the capital markets in recent months acting as the depositary bank for their IPOs, including Xunlei, one of the top 10 Internet companies in China, and Jumei, China’s largest online cosmetics retailer by volume. We also recently executed the largest DR corporate action by value for Vodafone, structuring the DR component of its sale of its stake in Verizon Wireless, including a distribution of nearly $17 billion in value to Vodafone DR holders.

Looking at the markets now, in July 2014, we are seeing a relaxation of the concern over U.S. Federal Reserve tapering and market sentiment once again turning towards emerging markets to seek out innovative and profitable global companies with which to partner. DRs will help issuers and investors explore that potential.

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OTCM: What strategic services do you offer your DR issuers?

CK: Our Global Investor Relations Advisory team is truly impressive in the range of services they offer and in their results. With members based in New York, London and Hong Kong, they draw on extensive capital markets experience to develop strategic objectives to help BNY Mellon’s issuer clients generate more liquidity in their shares and increase transparency among sell-side analysts, institutional investors, retail investors, high-net-worth individuals, and the financial media—the full range on the buy-side. The team provides clients global best-practice advisory services and works with them to help both set and achieve measurable goals for their investor relations programs.

One area of focus recently in investor relations has been corporate access—corporate issuers’ access to investors and the reverse. We devote significant resources to help our client issuers in this area. For example, after Avianca’s initial capital raising on the NYSE in November 2013, BNY Mellon executed a non-deal roadshow for the company in February 2014 focusing on investors not included in their pre-listing deal roadshow. The roadshow resulted in several new investors, including one that is now among Avianca’s top 20 shareholders; that’s a result.

OTCM: What is the benefit to companies of having a sponsored Level 1 ADR traded on a transparent marketplace like OTCQX?

CK: We know that each foreign issuer has its own goals and objectives when offering an ADR in the U.S. marketplace, and of course some have greater needs than others. A foreign issuer with a sponsored ADR program with BNY Mellon, listed or not, is going to benefit from the services and expertise we offer.

Trading on the OTCQX marketplace provides a foreign issuer visibility and access to U.S. investors with the potential for enhanced liquidity for its DRs outstanding and traded. A foreign issuer already listed and reporting in its local market will not have to duplicate reporting efforts in order to trade on OTCQX, while benefitting from access to the entire U.S. investment community. OTCQX provides advantages of both worlds for foreign issuers.

OTCM: What types of international companies are best suited to the OTCQX marketplace?

CK: Any non-U.S. issuer making itself available on the OTCQX to the entire U.S. investment community in a cost efficient and transparent manner expands the visibility of its brand and may very well increase its liquidity and, potentially, overall valuation. So the answer is that no foreign issuer that meets the qualification standards is less suited than another for the OTCQX. That said, I would say that companies that are part of a recognized international index utilized by U.S. investors for investment purposes should look to establish a sponsored DR program. OTCQX may well be the right platform on which to do so.

OTCM: BNY Mellon and OTC Markets Group recently launched the OTCQX ADR 30 Index which tracks the performance of the top 30 ADRs traded on the OTCQX marketplace. What are the benefits of an index like this for issuers and investors?

CK: BNY Mellon DR Indices are rules-based and are evaluated on a periodic basis using “liquidity screens” to ensure the investability of each index. This opens the member issuers’ DRs to investors who now have more of the information they need to make their investment decision. Our objective in working with OTC Markets to create the OTCQX ADR 30 Index was to demonstrate to investors, intermediaries, and other market participants that these sponsored ADR programs are just as liquid, if not more so, than national market securities and, as such, can be part of structured products.

OTCM: India is considering changing its rules to permit Indian companies to create OTC non-capital-raising ADR programs. What would be the benefits of this to Indian companies and the Indian economy as well as investors?

CK: We thought that the M.S. Sahoo Committee report on DRs announced by India’s Ministry of Finance in May of this year was terrific news for India and the global investment community. The report, recommending allowing over-the-counter (OTC) non-capital-raising American depositary receipt (ADR) programs on any kind of securities, not only equity, is a remarkable study that acknowledges the regulatory constraints that currently inhibit foreign investment in India. There is significant international demand for Indian equity, and greater access to DRs may meet some of the demand not satisfied through routes previously available. Our conversations with global investors in the wake of the report’s release indicated they welcomed this news warmly and they are now looking forward to exploring greater investment in India in the near future.

While it could be argued that the importance of DRs has subsided since India’s onshore market has developed, DRs remain an attractive route for foreign investment into India. In our research report from March 2013, “India: Easing Conditions for Investors,” we found nearly half of all global funds that invest in India using DRs chose not to invest directly through local shares. Many indicated a preference for the familiarity and convenience of DRs and were unable or unwilling to invest directly in Indian equity or use derivatives.

The introduction of the new scheme for DRs will provide global investors with convenient access to Indian companies, who in turn can attract foreign investment through DRs as a flexible and cost-efficient securities product. In permitting OTC non-capital-raising DRs, India would join more than 60 countries worldwide whose companies have established non-capital raising DR programs for secondary market investors. This would be ground-breaking in the promotion of greater integration of the Indian financial system with international capital markets, and we look forward to being a part of it.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of June 30, 2014, BNY Mellon had $28.5 trillion in assets under custody and/or administration and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

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Light Up The Market
Follow us on Twitter at @OTCMarket to keep up with OTCQX companies
Lighting Up Their Market!

New OTCQX company Chilean Metals Inc. (OTCQX: CMETF) Lights up the Market!

FLYHT Aerospace Solutions Ltd. (OTCQX: FLYLF) Lights up the Market to celebrate joining OTCQX.

Greater Hudson Bank (OTCQX: GHDS) Lights up the Market! The community bank serving the Hudson Valley region of New York is the 10th bank to join OTCQX.
Monthly Trade Summary

June 2014

Marketplace Designations # of Securities* Monthly Dollar Volume Monthly Dollar Volume
per Security
YTD Dollar Volume Aggregate Market Capitalization
(in Millions)*
OTCQX® 354 $2,746,125,938 $7,757,418 $18,421,576,181 $1,635,065
OTCQB® 2,674 $3,803,756,066 $1,422,497 $42,064,642,456 $175,009
OTC Pink® Current Information 3,746 $9,438,743,435 $2,519,686 $60,919,277,468 $12,536,198
OTC Pink Limited Information 519 $129,879,430 $250,249 $1,353,848,810 $37,283
OTC Pink No Information 2,601 $828,622,577 $318,578 $7,400,381,275 $57,547
Totals 9,894 $16,947,127,447 $1,712,869 $130,159,726,190 $14,441,102
*Data as of June 30, 2014
Newsletter Sponsor
Product Updates
Market Data Updates
Business Wire Press Releases Distributed to a Wider Audience
  The OTC Disclosure & News Service has been integrated with Business Wire to offer companies a more streamlined way to share information with U.S. investors. Subscribers will see press releases issued through Business Wire automatically populate their company’s stock page at www.otcmarkets.com and flow through to market data distributors, financial portals, investment databases and broker-dealers who trade OTCQX®, OTCQB® and OTC Pink® securities.

Seamlessly Distribute 700+ Word PR Newswire Press Releases
  Companies that leverage the integration of PR Newswire with the OTC Disclosure & News Service to distribute their news may now seamlessly share press releases that are longer than the previous word limit of 700 words through otciq.com. Companies will continue to benefit from discounted rates for distribution to regional, national and international media outlets.
The OTCQX ADR 30 Index rose 3.43% in the second quarter.

The OTCM ADR Index increased 4.23% in the second quarter.

The OTC History File is no longer available via CD on a monthly basis. The file will be still be available via FTP on a daily basis.
For more information, contact our Market Data Services at + or marketdata@otcmarkets.com.
Regulation & Compliance
Reminder: New FINRA ORF Platform
  The migration date for firms to begin reporting OTC equity security trades and trades in restricted equity securities effected pursuant to Securities Act Rule 144A to the new OTC Reporting Facility (ORF) technology platform is September 15, 2014. Additional information can be found here. FINRA has also published a new FINRA OTC Reporting Facility (ORF) Migration Website. The SEC has approved amendments to the Equity Trade Reporting and OATS Rules that will also be effective on September 15, 2014. Broker-dealers that utilize a service bureau to report trades on their behalf are reminded that they must complete the FINRA Transparency Services Participation Agreement, FINRA Transparency Services Uniform Service Bureau/Executing Broker Agreement, and for those firms that have a service bureau reporting via a FIX connection the FINRA Services Port Request Form.

Require New Certification upon Filing a Form 211
  FINRA has amended FINRA Rule 6432 (Compliance with the Information Requirements of SEC Rule 15c2-11) to require members to certify that they have not accepted any payment or other consideration for market making from issuers and related persons. The new Form 211 including the certification requirement may be found here.

New Requirements Require Alternative Trading Systems to Report Weekly Volume Information
  Effective May 12, 2014, FINRA Rule 4552 requires Alternative Trading Systems (ATS) to (i) report to FINRA weekly volume information and number of securities transactions within the ATS by security and (ii) acquire and use a single, unique market participant identifier (MPID) when reporting information to FINRA. OTC Link® ATS provides reporting under this rule. The full notice can be found here. ATS Transparency Data can be found here.

Form 211 Information Repository
  FINRA is soliciting comment on a proposal to make publicly available through FINRA’s website a repository of Form 211 information.  FINRA’s Regulatory Notice may be found here.
Events, Webinars & Sponsorships
STA National 81st Annual Market Structure Conference (October 1-4, 2014)

Data Transparency Conference 2014 - Washington DC (September 30, 2014)

8th Annual Depository Receipt Issuers' Conference, Indian Sub-Continent (September 4-7, 2014)

2014 STANY Golf Outing - New York (July 28, 2014)

IR Magazine Awards - Brazil 2014 - Sao Paulo, Brazil (July 22, 2014)

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

OTC Markets Group Announces Second Quarter Performance of OTCM ADR Index and OTCQX ADR 30 Index - press release (July 17, 2014)

OTC Markets Group Welcomes Greater Hudson Bank to OTCQX® - press release (July 10, 2014)

OTC Markets Group Congratulates Sphere 3D Corp. on NASDAQ Listing - press release (July 7, 2014)

OTC Markets Argues for Form 211 Filing Fees - Growth Capital Investor (July 1, 2014)

Canadian lawyers allowed to become U.S. PALs - Financial Post (June 24, 2014)

Marketplace for small public banks takes off - SNL Financial (June 23, 2014)
Congratulations to Gulf Coast Ultra Deep Royalty Trust (NASDAQ: GULTU) and Sphere 3D Corp. (NASDAQ: ANY) on graduating from OTCQX to an exchange listing. We wish them success as they take this next step!

Fact of the Month
6 new companies joined OTCQX in June:

10 new companies joined OTCQB in May and June:

A complete list of OTCQX companies is available on www.otcmarkets.com.
www.otcmarkets.com receives 1 million visits on average each month from investors, issuers and market participants researching OTCQX, OTCQB and OTC Pink securities.*

*Data from January 1, 2014 - June 30, 2014

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