Here’s a rundown of how the over-the-counter stock markets work and the types of securities you might find on the OTC markets. We’ll also discuss some other key information you should know before you decide whether OTC stocks are right for you. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. The OTC Markets Group is the owner and operator of the most substantial U.S. inter-dealer electronic quotation and trading system for over-the-counter (OTC) securities. It provides marketplaces for trading more than 11,500 OTC securities.
You’ll also find stocks on the OTC markets that cannot list on the NYSE or the Nasdaq for legal or regulatory reasons. To learn more about how we create better informed and more efficient markets, visit To be able to trade in the OTC market, a company must be sponsored by a market maker. The market maker will sponsor the issue as market makers are the only ones allowed to apply to have a quote listed.
- This information is not intended to be used as the sole basis of any investment decision, should it be construed as advice designed to meet the investment needs of any particular investor.
- Companies delisted from the major exchanges can trade as OTC stocks.
- It’s a holdover from a time when you could actually buy shares over the counter.
That used to be an exchange, but it’s now owned by the same holding company that owns the NYSE. Over the course of the last 20 years, our markets have increased the level of transparency and improved availability of information for investors. These enhancements have helped to improve the capital formation process and underscore the concept that we designed our markets for companies that want to do the right thing. Historically, the phrase trading over the counter referred to securities changing hands between two parties without the involvement of a stock exchange. However, in the U.S., over-the-counter trading is now conducted on separate exchanges. The Company is authorized to purchase shares from time to time on the open market, from employees and through block trades, in compliance with applicable law.
Our real-time data allows broker-dealers to execute client trades at the best prices with a choice of counterparties. Companies listed here report to a U.S. regulator such as the SEC or Federal Deposit Insurance Corporation (FDIC). The OTCQB replaced the Financial Industry Regulatory Authority (FINRA)-operated OTC Bulletin Board (OTCBB) as the main market for trading OTC securities that report to a U.S. regulator. Because it has no minimum financial standards, the OTCQB includes shell companies, penny stocks, and small foreign issuers. The most visible aspect of the OTC Markets Group’s stewardship is the breakdown of the OTC market into three tiers, based on the quality and quantity of the listed companies’ information and disclosures. This tiered structure provides different levels of transparency, so investors know what type of information is available for each company they wish to trade.
Our registered trading platforms, OTC Link® ATS and OTC Link ECN, enable investors to easily trade through the broker of their choice and empower companies to improve the quality of information available for investors. Both of our platforms are highly regulated by the SEC, and OTC Link ATS is an SCI regulated entity. Non-GAAP financial measures do not replace and are not superior to the presentation of GAAP financial results but are provided to improve overall understanding of the Company’s current financial performance. Management believes that this non-GAAP information is useful to both management and investors regarding certain additional financial and business trends related to the operating results. Management uses this non-GAAP information, along with GAAP information, in evaluating its historical operating performance. OTC markets are safe to trade but there are some risks with the process, such as less information available about the securities and less liquidity.
On March 6, 2023, the Board of Directors refreshed the Company’s stock repurchase program, giving the Company authorization to repurchase up to 300,000 shares of the Company’s Class A Common Stock. Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
OTC stock can be more volatile, meaning you stand to gain or lose more money quickly, and it can also be more prone to fraud. This is for informational purposes only as StocksToTrade is not registered as a securities broker-dealer or an investment adviser. To list on the OTC exchanges, companies must have FINRA-approved broker-dealer sponsors. And they must have at least three broker-dealers willing to trade the security.
Sometimes a company doesn’t meet the listing requirements for major exchanges. Or they might meet listing requirements, but management doesn’t want to pay listing fees. Sketchy companies stay off the listed exchanges to avoid scrutiny and regulation. OTC Link ATS is what’s known as a qualified interdealer quotation system (“Qualified IDQS”) that electronically connects a network of regulated broker-dealers. With the changes to Rule 211, OTC Link ATS can play a greater role in bringing a company onboard to begin to be quoted on our markets, as well as monitoring ongoing issuer disclosure.
The SEC’s Division of Enforcement —takes responsibility for investigating possible violations of securities laws, and, in conjunction with the U.S. Today, the majority of U.S. states recognize OTCQX and OTCQB market disclosure standards for compliance with Blue Sky laws, and the changes to Rule 211 codified our critical role in monitoring ongoing issuer Over-the-counter Trading disclosure. Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.
The middle tier is called OTCQB, also known as the Venture Market, which consists of early-stage and developing U.S. and international companies that are not yet able to qualify for the OTCQX. The company must be current in its reporting, undergo an annual verification, management certification, meet a $0.01 bid test, and must not be in bankruptcy to meet eligibility standards. Many of the stocks traded over the counter are what are known as penny stocks. That typically means stocks where a single share sells for less than $5.
Boiler rooms would sell massive volumes of these stocks over the phone to people at home. It is the responsibility of a public company’s management and directors to comply with securities laws, be truthful and provide the investing public with timely and accurate disclosure. With that comes a duty to immediately release material news to the market and correct any misinformation that can affect the market pricing process. Because they trade like most other stocks, you can buy and sell OTC stocks through most major online brokers. To buy shares of an OTC stock, you’ll need to know the company’s ticker symbol and have enough money in your brokerage account to buy the desired number of shares.
The CE alert allows retail brokers to quickly restrict client trading in a security with problematic activity. We also make referrals to the SEC and note instances that warrant further scrutiny. The second-largest stock exchange in the world focuses on technology. It is a publicly-traded company that is headquartered in New York.
Which stocks are major institutional investors including hedge funds and endowments buying in today’s market? Click the link below and we’ll send you MarketBeat’s list of thirteen stocks that institutional investors are buying up as quickly as they can. Low capitalization stocks in relatively unknown companies can be targets for investor fraud. In some cases, company management might lie to investors about company assets or business ventures, planning to effectively disappear with cash from bilked stock buyers.
This information is not intended to be used as the sole basis of any investment decision, should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns. FINRA provides oversight for trading on the OTC market and issues trading symbols. It requires public companies to report splits, reverse splits, name changes, and mergers.