Understanding the OTC Market For Penny Stock Trading


The way the OTC market is organized and persists can be confusing for novice investors. If you are interested in penny stock trading, you should be able to delineate the different parts of the OTC market. It includes the NASDAQ National Market, OTC Pink Markets, and the over-the-counter notice board.

What is the OTC market?

The OTC securities market involves the trading of securities outside of major stock exchanges like the NYSE, AMEX and, for the most part, outside of NASDAQ. The stocks traded in this market tend to be penny stocks – which have a lot of definitions, but for now you can just designate them as highly speculative stocks with a value of less than $ 5 per share. – and often do not meet the requirements of the main Exchanges. These unfulfilled requirements can range from filing with the SEC (Securities and Exchange Commission) to meeting a minimum market cap or share value.

The first part of this market is the National Association of Securities Dealers Automated Quotation (NASDAQ) National Market (NNM). Although this is an over-the-counter securities market, you won't find penny stocks there.

Pink leaves

The real stock market, as most understand it, exists with Pink OTC Markets and the over-the-counter notice board. The Pink OTC Markets, informally referred to as Pink Sheets, is a quotation service that facilitates transactions between qualified brokers. The pink leaves have several parts. The news service is called the Pink Sheets News Service. Pink Quotes provides data on ranked stocks in a number of ways. Stocks that meet Pink Leaf disclosure standards are listed on the OTCQX, with smaller stocks on PrimeQX and larger stocks on PremiereQX.

Penny stocks that do not meet the Pink Sheet requirements for the OTCQX are listed under three levels of disclosure: current information, no information, and limited information. An important note is that most stocks on Pink Sheets do not need to meet the same requirements as major stock exchanges and do not need to file with the SEC.

The over-the-counter bulletin board

The Over-the-Counter Notice Board (OTCBB) exists somewhere between the major exchanges and the pink sheets. It provides real-time quotes of securities that must file and stay current with the SEC, but these penny stocks are still highly speculative and don't need to meet the same requirements as real exchanges (like NASDAQ). or the NYSE).

Hope this will give you a clear view of the main avenues across the OTC market. Be careful when trading in this area as it is endemic to manipulation and fraud as these low value stocks will inevitably be more speculative.

Comments are closed.