securities to be quoted, the OTC BB and the Pink Sheets. What has separated them in the past is the notion of better quality on the OTC BB due to to full SEC reporting requirements, and the wide spread availability of level two quotes leading to better transparency. Today, however, things have changed dramatically. The Pink Sheets has opened up level II quotes, and has developed a quality tier system that could end the very existence of the OTC BB in quick fashion. FINRA owns the OTC BB and has been looking to sell it for some time now, with no bidders. FINRA wants to reposition itself in the overall OTC markets. It's also worth noting that much of the content on the OTCBB website is grossly outdated, a pretty weak asset that they are trying to sell. The number of companies listing on the OTC BB is shrinking dramatically, despite the now debunked notion of better quality. Companies that were listed dually on the OTC BB and Pink Sheets are seeing market makers pull their bids from the OTC BB, effectively delisting them to solely trade on the Pink Sheets. The reason they are doing this is not only the fact that the Pink Sheets is now structured to quickly evaluate a number of different levels of reporting standards encompassing the entire OTC market, but superior performance, features and lower costs are associated with the Pink Sheets trading platform as well. So while the OTC BB continues to wither away, it will be important to get a feel for the new Pink Sheets tier system, and find it's OTC BB counterparts. The Pink Sheets is starting to lose the Pink Sheets name in favor of “OTC Markets”. This is from the website:
for broker-dealers to trade unlisted securities. We organize the OTC marketplace into three tiers based on the level of disclosure companies choose to provide to investors: OTCQX, OTCQB and OTC Pink.” The OTCQX has the highest level of standards going one step beyond requiring companies to just be current in all of their SEC filings, but adds monetary and quality guidelines. This level currently only contains around 176 issues. The OTCQB is the middle tier, and where the bulk of all fully reporting over the counter stocks are and will end up. There are currently close to 4000 stocks in this venue. The OTCPink is where all the companies that are not current in their filings end up. Right now there are close to 6,000 securities here, and the OTCMarkets website divides this group of delinquents into its own sort of sub-tiers. The OTCPinks are further divided by weather a company is partial reporting, or not reporting at all. There is a bottom dwelling level as well, the grey market, which includes stocks that have no market makers. OTCMarkets also lets you know if any stock is being investigated for fraud or questionable promotion or has liquidity concerns So from now on, whenever you are researching an unlisted stock, go on over to OTCMarkets. com and plug in the symbol no matter if it is an OTC BB or a Pink Sheet. There are only 30 stocks that are solely quoted on the OTC BB, so chances are you will gain a more instant and better level of understanding as to the quality, reporting status, liquidity and fraud potential of the company than you will anywhere else. |
February 28, 2011 PSW Staff |
Fundamental Penny Stock Trading Information |
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