OTC Market 101

The OTC Marketplace is comprised of over 9,000 securities not listed on a U.S. stock exchange. They represent a broad and diverse group of companies with a variable level of financial strength, disclosure availability and management quality with market capitalizations ranging from micro-cap start-ups to large cap multi-national companies. The OTC is a broker-driven marketplace where brokers can trade using Pink OTC's electronic interdealer quotation and trading system.

• Information for OTC-Traded Companies

OTC Market Tiers

Pink OTC Markets categorizes all OTC securities into easily identifiable tiers that help investors readily identify a company's willingness to make disclosure available to investors. The OTCQX marketplace is a quality-controlled market for investor friendly companies; the OTCQB identifies companies that are registered and reporting with the SEC or banking regulators; and the Pink Sheets marketplace for companies that have current, limited or no public disclosure. Segmenting the OTC marketplace motivates issuers to provide the highest level of disclosure and compliance based on their capabilities and leads to more efficient capital allocation by investors.

OTC Investors

The OTC market presents investment opportunities for intelligent, informed investors, but also has a high degree of risk. Pink OTC Markets created the OTC Market Tiers to help investors identify the risk profiles of OTC-traded companies.

• Caveat Emptor Policy - Companies whose stock is the subject of a promotional campaign or other public interest concern are flagged “Caveat Emptor” or “Buyer Beware.” Pink OTC Markets believes that investors should take additional precautions when making investment decisions in stocks flagged Caveat Emptor.

OTC Marketplace Rules & Regulations

The Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) regulate trading in the OTC market. SEC Rule 15c2-11 governs how securities become traded on the OTC, and FINRA maintains rules pertaining to Best Execution, Protection of Customer Limit Orders, Trade Reporting, Short Sale Reporting, and more.

OTC Company Reporting

In contrast to securities listed on U.S. stock exchanges, securities may trade in the OTC market whether or not they are registered with the SEC. There are three ways that issuers of OTC traded securities provide disclosure to investors:

• U.S. Registered & Reporting Standard
• International Information Standard
• Alternative Reporting Standard

How to Become an OTC-Traded Company

The OTC market is not a listed marketplace; therefore, companies cannot apply to be listed in the OTC market. To be quoted in the OTC market on Pink OTC Markets' electronic quotation and trading system, at least one market maker who is a FINRA member must be willing to quote a company's stock. A market maker must file a Form 211 with FINRA or meet one of the exemptions to SEC Rule 15c2-11 in order to begin quoting a new security.

Information for Broker-Dealers

Quotations are only accepted from SEC registered broker-dealers. Market makers are subject to applicable Federal and State securities laws and FINRA or other SRO membership rules. Market makers must be subscribers and have quotation privileges to quote securities on Pink OTC's quotation system or the Yellow Sheets. FINRA rules require broker-dealers to submit information to FINRA gathered pursuant to SEC Rule 15c2-11 before initiating or resuming a quotation of an OTC equity on Pink OTC's quotation system.

Frequently Asked Questions