OTC Bulletin Board
Encyclopedia
The OTC Bulletin Board or OTCBB is an interdealer electronic quotation system in the United States
that displays real-time quotes, last-sale prices, and volume information for many over-the-counter
(OTC) equity
securities
that are not listed on the NASDAQ
stock exchange
or a national securities exchange. Broker-dealer
s who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities. According to the SEC, "fraudsters often claim or imply that an OTCBB company is a Nasdaq company to mislead investors into thinking that the company is bigger than it is."
FINRA
runs and provides regulatory services to the OTCBB. The OTCBB formerly collected 100% of quotes, but that number has declined with the rise of its competitor Pink OTC Markets. In September 2009, FINRA announced that it would be selling the OTCBB. Pink OTC Markets was the leading contender for purchasing the OTCBB, but terms could not be reached between itself and FINRA. In September 2010, FINRA announced that it had reached terms for the sale of the OTCBB with well known investment bank Rodman & Renshaw. Along with the sale of the OTCBB and, in an effort to provide uniform regulation to all OTC issues and, subsequently, transparency to the OTC market, FINRA has proposed a "quotation consolidation system." Under the quotation consolidation system, FIRNA would require dealers to report all of their quotes to the quotation consolidation system, regardless of the market upon which they were originally quoted. This would enable FINRA to have access to all quotes in OTC issues and regulate the OTC market in its entirety. Pink OTC argues this is anti-competitive and an abuse of FINRA's authority.
Companies quoted on the OTCBB must fully report (i.e. current with all required SEC filings) but have no market capitalization
, minimum share price, corporate governance
or other requirements to be quoted. Companies which have been "de-listed" from stock exchanges for falling below minimum capitalization, minimum share price or other requirements often end up being quoted on the OTCBB.
Stock of non-reporting companies (those without current SEC filings) may be quoted in the Pink Sheets
. Most OTCBB companies are dually quoted, meaning they are quoted on both the OTCBB and the Pink Sheets.
Stocks traded in OTC markets such as the OTCBB or Pink Sheets are usually thinly traded microcap or penny stock
s, and both retail and institutional investors generally avoid them, because of fears that share prices are easily manipulated and there exists a potential for fraud
. The SEC issues stern warnings to investors to beware of common fraud and manipulation schemes. As such, most companies choose to list on more established exchanges such as the AMEX
, NYSE
, or NASDAQ
once eligible. FINRA believes that the proposed "quotation consolidation system" would enhance transparency, thereby decreasing the potential for price manipulation or fraud.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
that displays real-time quotes, last-sale prices, and volume information for many over-the-counter
Over-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
(OTC) equity
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
that are not listed on the NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
or a national securities exchange. Broker-dealer
Broker-dealer
A broker-dealer is a term used in United States financial services regulations. It is a natural person, a company or other organization that trades securities for its own account or on behalf of its customers....
s who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities. According to the SEC, "fraudsters often claim or imply that an OTCBB company is a Nasdaq company to mislead investors into thinking that the company is bigger than it is."
FINRA
Financial Industry Regulatory Authority
In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization . FINRA is the successor to the National Association of Securities Dealers, Inc. ...
runs and provides regulatory services to the OTCBB. The OTCBB formerly collected 100% of quotes, but that number has declined with the rise of its competitor Pink OTC Markets. In September 2009, FINRA announced that it would be selling the OTCBB. Pink OTC Markets was the leading contender for purchasing the OTCBB, but terms could not be reached between itself and FINRA. In September 2010, FINRA announced that it had reached terms for the sale of the OTCBB with well known investment bank Rodman & Renshaw. Along with the sale of the OTCBB and, in an effort to provide uniform regulation to all OTC issues and, subsequently, transparency to the OTC market, FINRA has proposed a "quotation consolidation system." Under the quotation consolidation system, FIRNA would require dealers to report all of their quotes to the quotation consolidation system, regardless of the market upon which they were originally quoted. This would enable FINRA to have access to all quotes in OTC issues and regulate the OTC market in its entirety. Pink OTC argues this is anti-competitive and an abuse of FINRA's authority.
Companies quoted on the OTCBB must fully report (i.e. current with all required SEC filings) but have no market capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
, minimum share price, corporate governance
Corporate governance
Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
or other requirements to be quoted. Companies which have been "de-listed" from stock exchanges for falling below minimum capitalization, minimum share price or other requirements often end up being quoted on the OTCBB.
Stock of non-reporting companies (those without current SEC filings) may be quoted in the Pink Sheets
Pink Sheets
OTC Markets Group, Inc., informally known as "Pink Sheets", is a private company that provides services to the U.S. over-the-counter securities market including electronic quotations, trading, messaging, and information platforms. According to the U.S. Securities and Exchange Commission, OTC...
. Most OTCBB companies are dually quoted, meaning they are quoted on both the OTCBB and the Pink Sheets.
Stocks traded in OTC markets such as the OTCBB or Pink Sheets are usually thinly traded microcap or penny stock
Penny stock
In the United States, penny stocks are common shares of small public companies that trade at less than $1.00. In some countries, similar shares of stock are known as cent stocks.-Concerns for investors:...
s, and both retail and institutional investors generally avoid them, because of fears that share prices are easily manipulated and there exists a potential for fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
. The SEC issues stern warnings to investors to beware of common fraud and manipulation schemes. As such, most companies choose to list on more established exchanges such as the AMEX
American Stock Exchange
NYSE Amex Equities, formerly known as the American Stock Exchange is an American stock exchange situated in New York. AMEX was a mutual organization, owned by its members. Until 1953, it was known as the New York Curb Exchange. On January 17, 2008, NYSE Euronext announced it would acquire the...
, NYSE
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
, or NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
once eligible. FINRA believes that the proposed "quotation consolidation system" would enhance transparency, thereby decreasing the potential for price manipulation or fraud.