What Was the Over-the-Counter Bulletin Board (OTCBB)?
Let me explain what the over-the-counter bulletin board (OTCBB) was: it was an electronic quotation service run by the Financial Industry Regulatory Authority (FINRA) for its members, providing over-the-counter (OTC) trade data for U.S. stocks. Unlike other OTC platforms, the OTCBB was strictly a quotation-only service. In 2020, FINRA announced they were winding it down because most OTC stock trading had shifted to OTC Markets Group's platforms. They officially shut it down on November 8, 2021.
Key Takeaways
- The over-the-counter bulletin board (OTCBB) was a regulated quotation service for over-the-counter (OTC) securities provided by the Financial Industry Regulatory Authority (FINRA).
- It offered up-to-the-minute quotes, last-sale prices, and volume information.
- All companies listed on the platform had to file current financial statements with the Securities and Exchange Commission (SEC) or another relevant federal regulator.
- Only a select few OTCBB stocks successfully moved from the OTC market to a major exchange.
- In 2020, FINRA decided to wind down the OTCBB services, as the platforms provided by OTC Markets Group had taken the lion's share of U.S. OTC stock trading and data.
Understanding the Over-the-Counter Bulletin Board (OTCBB)
The OTCBB provided traders and investors with up-to-the-minute quotes, last-sale prices, and volume information for equity securities traded OTC. Every company listed there had to file current financial statements with the SEC or another relevant federal regulator.
It was established in 1990 after the Penny Stock Reform Act of 1990 required the SEC to create an electronic quotation system for stocks that couldn't list on major exchanges. OTC stocks were traded between individuals and market makers via computers and phones.
These OTC stocks on the OTCBB weren't part of any major exchanges, mainly because they were small and volatile, making it hard to meet listing requirements. From a trading perspective, the bid-ask spread is usually larger for these stocks since they trade less frequently than exchange-listed ones. Only a handful of OTCBB stocks ever made it to a major exchange.
Remember, the pink sheets are operated by a private company, while FINRA ran the OTCBB service.
Special Considerations
For small companies that couldn't meet the listing requirements for national exchanges, the OTCBB—and now the offerings from OTC Markets Group—provided a key alternative.
These small companies need investor financing to grow, even if their market value never matches a mid-cap stock. Investors get drawn in by the potential for big returns on the OTC market when some of these firms succeed and generate outsized profits.
While these companies use OTC markets instead of major exchanges, you need to keep in mind that the OTCBB and OTC Markets Group aren't actual exchanges; they're quotation services. All OTC securities are traded through a network of market makers who enter quotes and trades via a secure computer network accessible only to subscribers.
Phasing Out the Over-the-Counter Bulletin Board (OTCBB)
As I mentioned, almost all OTC stock quotes and trades now happen on OTC Markets Group's platforms, like OTCQX, OTCQB, and the Pink Open Market.
In 2020, FINRA filed a rule change with the SEC to stop operating the OTCBB, which took effect on November 8, 2021. The OTCQB has basically replaced the OTCBB as the primary market for OTC securities that report to a U.S. regulator. With no minimum financial standards, the OTCQB includes shell companies, penny stocks, and small foreign issuers.
OTCBB vs. Pink Sheets
Both the OTCBB and pink sheets are quotation services for OTC stocks. FINRA operated the OTCBB, while a private company runs the pink sheets. Listing standards are generally looser for pink sheets, meaning some stocks there might not have qualified for the OTCBB.
Stocks on the OTCBB were usually registered with the SEC (except where not required), but pink sheets stocks might not file regular reports or register with the SEC. There are other quotation services beyond these, and you can also buy unlisted stocks directly from a broker.
Be aware that the lack of filing requirements for pink sheets stocks makes them inherently riskier.
Frequently Asked Questions
How did you trade in OTCBB penny stocks? Penny stocks didn't actually trade on the OTCBB. They trade for less than $1 per share through a brokerage, and the OTCBB just helped track their prices but didn't facilitate the trading.
Which app allowed you to trade on the OTCBB? No app let you trade directly on the OTCBB because it was only a price-quoting service. You traded stocks via brokerage apps that quoted prices from the OTCBB.
Were OTC stocks publicly traded? OTC stocks were traded without a broker or central exchange since they were too small for formal exchanges. Some were considered publicly traded, but others on the OTC market were private companies.
What was listed on the OTCBB? It included securities traded on the OTC market, such as stocks, warrants, units, and ADRs.
Is it safe to buy OTC stocks? There are two main risks: poor liquidity because they're thinly traded, and the lack of reliable company information.
Can I buy OTC stocks on Robinhood? Robinhood doesn't offer OTC stocks, though it does allow trading of certain penny stocks.
Other articles for you
Economic expansion is the phase of the business cycle where GDP grows from a trough to a peak, accompanied by rising employment and consumer confidence.
The Directional Movement Index (DMI) is a technical indicator that measures the strength and direction of price trends to help traders make informed decisions.
The qualified widow or widower status allows surviving spouses to use married filing jointly tax benefits for up to two years after their spouse's death, provided they meet specific IRS criteria.
This text explains the annual percentage rate (APR) as a measure of the true cost of borrowing or earning on investments, including how it works, calculations, types, comparisons, and limitations.
The Low-Income Housing Tax Credit (LIHTC) is a federal program providing tax incentives to developers for creating affordable rental housing for low-income families.
Competitive intelligence is the process of gathering and analyzing information on competitors and market factors to inform strategic business decisions and gain a competitive edge.
Stress testing evaluates the resilience of systems, institutions, and portfolios against adverse scenarios across industries like finance, engineering, software, and healthcare.
Direct investment, or foreign direct investment (FDI), involves acquiring a controlling interest in a foreign business by providing capital for equity without buying regular shares.
Administrative Services Only (ASO) is a self-funded employee benefit plan where companies hire external vendors to administer claims while retaining financial responsibility.
An asset is any resource with monetary value that can generate income or be sold for profit.