What Is OTC Markets Group Inc.?
Let me explain what OTC Markets Group Inc. is: it's the owner and operator of the biggest U.S. inter-dealer electronic quotation and trading system for over-the-counter (OTC) securities. This system provides marketplaces where you can trade more than 11,500 OTC securities.
Key Takeaways
You should know that OTC Markets Group Inc. stands as the largest U.S. marketplace for OTC securities, with over 11,500 listed as of 2022. It focuses on three core areas: trading services, market data, and corporate services. These securities are organized into three tiers—OTCQX with the strictest requirements, OTCQB as the venture market, and Pink Open Market for companies in distress or bankruptcy. Among them, the Pink Open Market has the most companies and highest trade volume. Most U.S. OTC trading happens on their OTC Link platform, which is an SEC-registered alternative trading system.
Understanding OTC Markets Group Inc.
OTC Markets Group Inc. delivers services in three essential areas to support better-informed and more efficient financial markets: trading services, market data, and corporate services. In trading services, it connects broker-dealers to provide liquidity and infrastructure for OTC trades. The market data side offers data and quotes for over 11,500 OTC securities. Corporate services help companies go public and increase visibility by listing in one of the three OTC tiers.
This company traces back to the National Quotation Bureau, founded in 1904. It became Pink Sheets LLC in 2000, then Pink OTC Markets Inc. in 2008, and finally OTC Markets Group in 2011. Their OTC Link platform handles most U.S. OTC trading as an SEC-registered broker-dealer. Headquartered in New York City, the company trades publicly on OTCQX under the symbol OTCM.
As of March 7, 2022, the combined dollar volume across all tiers was $219 million, with a share volume of $1.4 billion. The OTC Pink tier leads in the number of listed companies.
OTC Markets Group Inc. Tier Structure
The tier structure is the most prominent feature of OTC Markets Group's management, dividing the OTC market into three levels based on the quality and amount of company disclosures. This setup gives you different transparency levels, so you know what information is available for each company you're considering trading.
OTCQX
OTCQX is the top tier for OTC stock trading. Companies here must meet stricter qualifications than the other tiers. Known as the OTCQX Best Market, it features many blue-chip stocks from places like Europe, Canada, Brazil, and Russia—often global household names. Penny stocks, shell companies, and bankrupt firms can't list here.
OTCQB
The middle tier, OTCQB or the Venture Market, includes early-stage and developing U.S. and international companies that don't yet qualify for OTCQX. To be eligible, they need current reporting, annual verification, management certification, a $0.01 bid test, and no bankruptcy. These companies report to U.S. regulators like the SEC or FDIC. OTCQB took over from the FINRA-operated OTC Bulletin Board as the primary market for regulator-reporting OTC securities. With no minimum financial standards, it includes shell companies, penny stocks, and small foreign issuers.
OTC Pink
OTC Pink, or Pink Sheets, is the lowest and most speculative tier for OTC stocks. It covers a broad range of equities, including those in default or financial distress. Disclosure requirements are minimal, so categorizations come from company-provided info. Starting September 28, 2021, all OTC Markets tiers, including Pink, require up-to-date disclosures under SEC Rule 15c2-11.
Important Notes
OTC Markets Group has developed various financial indexes, such as OTCQX Banks, OTCQX Dividend, and OTCQX Canada.
Frequently Asked Questions
What does OTCM stand for? It means over-the-counter market, where securities are bought and sold directly between parties without a central exchange. It can also refer to OTC Markets Group, which runs a system for OTC trading.
Who runs OTCM? It's a publicly traded company headquartered in New York, led by President and CEO Cromwell Coulson.
What's the difference between stock exchanges and the OTC market? The OTC market allows direct trading without exchange oversight, while stock exchanges provide more liquidity, oversight, and transparency.
Is the OTC market safe to trade? It's generally safe, but risks include less information and lower liquidity. Choosing tiers with stronger standards can mitigate those risks.
What's the process for listing a public company in the OTC market? A company needs sponsorship from a market maker, as only they can apply to list a quote.
Disclaimer
This information is for educational purposes only and doesn't constitute tax, investment, or financial advice. It doesn't consider your specific objectives, risk tolerance, or circumstances, and may not suit all investors. Remember, investing carries risks, including potential loss of principal.
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