What is an OTC equity security?
Over-the-counter (OTC) securities are traded directly between counterparties without being listed on an exchange. Securities that are traded over-the-counter may be facilitated by a dealer or broker specializing in OTC markets. Companies with OTC shares may raise capital through the sale of stock.
Are OTC stocks safe?
With the exception of some large foreign firms, investors should generally avoid stocks that trade over-the-counter. Penny stocks – those that trade for low prices, often less than a dollar per share – are dangerous. Call them penny stocks, microcaps or OTC stocks; by any name, they’re bad news.
Is OTC regulated by SEC?
Both of our platforms are highly regulated by the SEC, and OTC Link ATS is an SCI regulated entity. With the upcoming changes to Rule 211, OTC Link ATS will play a greater role in bringing a company onboard to begin to be quoted on our markets, as well as monitoring ongoing issuer disclosure.
Who owns the OTC?
What Is OTC Markets Group Inc.? 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 11,000 OTC securities.
How does the OTC market work?
In an OTC market, dealers act as market-makers by quoting prices at which they will buy and sell a security, currency, or other financial products. A trade can be executed between two participants in an OTC market without others being aware of the price at which the transaction was completed.
What is the difference between OTC and pink sheets?
The OTCBB is a quotation service that also lists over-the-counter securities. The pink sheets are a privately held company, while FINRA provides the OTCBB service. The other difference between the pink sheets and OTCBB is that there are stricter standards for OTCBB. OTCBB issuers have to register with the SEC.
Who regulates OTC markets?
The Financial Industry Regulatory Authority (FINRA) regulates broker-dealers that operate in the over-the-counter (OTC) market. Many equity securities, corporate bonds, government securities, and certain derivative products are traded in the OTC market.
What are the rules for OTC equity securities?
Beginning February 4, 2008, the OATS Rules apply to OTC equity securities. Initial public offerings (IPOs), secondary offerings, Direct Participation Programs (DPPs), “restricted securities”, as defined by SEC Rule 144 (a) (3) under the Securities Act of 1933, and any securities designated in the PORTAL Market are not reportable to OATS.
What does OTC Link stand for in stock market?
OTC Link LLC (OTC Link) is an electronic inter-dealer quotation system that displays quotes, last-sale prices, and volume information in exchange-listed securities, OTC equity securities, foreign equity securities and certain corporate debt securities.
What kind of securities are quoted on the OTC Bulletin Board?
The OTC Bulletin Board (OTCBB) is an electronic inter-dealer quotation system that displays quotes, last-sale prices, and volume information for many OTC equity securities that are not listed on a national securities exchange. Securities quoted on the OTCBB include domestic, foreign and American depository receipts (ADRs).
What are the risks of OTC stock trading?
In particular, in addition to other augmented trading risks, OTC equity securities may be “thinly traded” or more illiquid than exchange-listed securities, which tends to increase price volatility and impair your ability to buy or sell within a reasonable period of time without adversely impacting execution price (s).