OTC Markets Group

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OTC Markets Group, Inc.
Type Public
Traded as OTCQXOTCM
Industry Financial Services
Predecessor(s) National Quotation Bureau, Pink Sheets, Pink OTC Markets
Founded 1913
Headquarters New York City, New York, United States
Key people R. Cromwell Coulson
(President, Chief Executive Officer and Director)[1]
Revenue Increase US$ 30,763,000 (2011)[2]
Operating income Increase US$ 7,106,000 (2011)[2]
Net income Increase US$ 4,852,000 (2011)[2]
Total assets Increase US$ 25,321,000 (2011)[2]
Total equity Increase US$ 12,872,000 (2011)[2]
Divisions Trading Services, Market Data Services, Issuer Services
Website otcmarkets.com

OTC Markets Group, Inc. (OTCQXOTCM), headquartered in New York City, operates a financial marketplaces platform providing price and liquidity information for almost 10,000[3] over-the-counter (OTC) securities. OTC-traded securities are organized into three marketplaces to inform investors of opportunities and risks: OTCQX, OTCQB and OTC Pink.

R. Cromwell Coulson
(President, Chief Executive Officer and Director)

History[edit]

The company was first established in 1913 as the National Quotation Bureau (NQB). For decades, the NQB reported quotations for both stocks and bonds, publishing the quotations in the paper-based Pink Sheets and Yellow Sheets respectively. The publications were named for the color of paper on which they were printed. In September 1999, the NQB introduced the real-time Electronic Quotation Service.[4] The National Quotation Bureau changed its name to Pink Sheets LLC in 2000 and subsequently to Pink OTC Markets in 2008. The company eventually changed to its current name, OTC Markets Group, in 2010.[5] Today, a network of over 160 broker-dealers price and trade a wide spectrum of securities on the OTC Markets platform.[5]

To be quoted on the platform, companies are not required to file with the SEC, although many choose to do so.[6] A wide range of companies are quoted on OTC Markets, including firmly established foreign firms, mostly through American Depositary Receipts (ADRs).[7] In addition, many closely held, extremely small and thinly traded US companies have their primary trading on the OTC Markets platform.

Many foreign issuers adhere to the listing requirements of qualified Non-US Stock Exchanges[8] and make their home country disclosure available in English.[9] There are also a significant number of U.S.-based issuers who are current in their reporting to regulators[10] such as the U.S. Securities and Exchange Commission (SEC) or make available ongoing quarterly and audited annual financial reports through OTC Markets Group.[9] Many companies in the lower market tiers of the OTC categorization system do not meet the United States' listing requirements for trading on a stock exchange such as the New York Stock Exchange or NASDAQ. Many of these issuers do not file periodic reports or make available audited financial statements, making it very difficult for investors to find reliable, unbiased information about those companies. For these reasons the SEC views many of the lower tier companies traded on OTC Markets as "among the most risky investments" and advises potential investors to heavily research the companies in which they plan to invest.[11]

Market tiers[edit]

OTC Markets Group established a categorization system to indicate the level of financial and corporate disclosure provided by the companies using its quotation system. Apart from the OTCQX tier, the disclosure categories do not signify issuer quality or merit of any security. Categorization is based on the level and timeliness of a company's disclosure and OTCQB and any of the OTC Pink categories can include both high quality as well as speculative, distressed, or questionable companies. Investors are encouraged to use caution when considering many of these companies for investment.[10]

OTCQX[edit]

The OTCQX marketplace includes both multinational companies seeking access to U.S. investors and domestic growth companies.[12] To be traded on this tier, companies undergo a qualitative review by OTC Markets Group.[13] Companies are not required to be registered with or reporting to the SEC, but must post financial information with OTC Markets Group. In addition, US companies must be ongoing operations (no shells etc.) and may not be in bankruptcy, while foreign issuers must meet the requirements of qualified Non-US exchanges.[9][14] Additional oversight of OTCQX securities is provided by requiring every issuer to be sponsored by approved third-party investment banks or law firms, called Principal American Liaison (PAL) for non-US issuers and Designated Advisors For Disclosure (DADs) for US issuers.[9][12][14]

OTCQB[edit]

Effective May 1, 2014, OTCQB will be implementing a one penny ($0.01) bid price requirement which is "intended to remove companies that are most likely to be the subject of dilutive stock fraud schemes and promotions." Each company verify via an annual OTCQB Certification, signed by the company CEO or CFO, that their company information is current. This will include information about a company’s reporting status, company profile, information on management and boards, major shareholders, law firms, transfer agents, and IR / PR firms. Investor confidence improves when there is more information about a company’s ownership structure, professional advisors and service providers. This certification will be required for any security newly qualified to be publicly quoted by a broker-dealer under SEC Rule 15c2-11, or when an OTC Pink traded company becomes a current SEC reporting company, beginning May 1, 2014. For companies already traded on OTCQB, there will be an annual management certification requirement throughout 2014 and 2015 based on a company’s Fiscal Year End ("FYE"). The first set of certifications will be due by July 31, 2014 for companies that have a FYE of March 31, 2014. Also beginning May 1, 2014, International Reporting companies may upgrade from OTC Pink to OTCQB if they publish their 12g3-2(b) compliant disclosure on our website and verify their company profile. There will be an annual fee for the OTCQB marketplace of $10,000 per year and a one-time $2,500 application fee. These fees are discounted for current OTCQB companies that apply in 2014 to $7,500 per year for the first two years, and the application fee will be waived. Companies that are not currently OTCQB companies will be required to pay the standard annual fee and application fee.[15]

OTC Pink[edit]

OTC Pink is an open marketplace that has no financial standards or reporting requirements. The stock of companies in the OTC Pink tier are not required to be registered with the SEC. Companies in this category are further categorized by the level and timeliness of information they provide to investors and may have current, limited or no public disclosure.

OTC Pink Current Information[edit]

Companies that have submitted information no older than six months to the OTC Markets data and news service or have made a filing on the SEC's EDGAR system in the previous six months are rated as having current information. This category includes shell companies or development stage companies with little or no operations as well as companies without audited financial statements.

OTC Pink Limited Information[edit]

Companies that are unwilling or unable to meet OTC Markets' Guidelines for Providing Adequate Current Information but have submitted some but not all of current information required are rated as having limited information. These are often companies with financial reporting problems, economic distress, or in bankruptcy.

OTC Pink No Information[edit]

This tier indicates companies that are unwilling or unable to provide disclosure to the public markets. Companies in this category do not make current information available via OTC Markets disclosure and news service, or if they do, the available information is older than six months. This category includes defunct companies that have ceased operations as well as 'dark' companies with questionable management and market disclosure practices. Securities of publicly traded companies that are not willing to provide information to investors are considered highly risky.

Caveat emptor - buyer beware[edit]

There is a public interest concern associated with the company. This may include a spam campaign, stock promotion or known investigation of fraudulent activity committed by the company or insiders. During a spam campaign, any stock that is not in the Current Information category will also have its quotes blocked on otcmarkets.com.

Other OTC markets[edit]

OTCBB[edit]

The OTC Bulletin Board (OTCBB) is a listing of securities that are also traded "over the counter" similar to the OTC Markets. OTCBB companies are required to file timely reports to a US regulatory agency. Almost all OTCBB companies are now quoted via OTC Markets' OTC Link ATS because its fully electronic trading platform better meets the needs of automated broker-dealers.

Grey Market[edit]

Securities that are not listed on any stock exchange nor formally quoted on OTC Markets or OTCBB are considered to be in the Grey Market. Unsolicited transactions are processed independently and not centrally listed or quoted. Trades are reported to a self-regulatory organization (SRO), which then passes the data on to market data companies.

References[edit]

  1. ^ "OTC Markets Group Inc: CEO and Executives - Businessweek". Bloomberg Businessweek. Retrieved 8 August 2012. 
  2. ^ a b c d e "OTC MARKETS GROUP INC. 2011 Annual Report". OTC Markets Group. Retrieved 8 August 2012. 
  3. ^ PETERSON, KRISTINA (October 20, 2010). "The Pink Sheets Tries to Change Its Colors". The Wall Street Journal. Retrieved 8 August 2012. 
  4. ^ "History of OTC Markets Groups". OTC Markets Group. Retrieved 8 August 2012. 
  5. ^ a b "History of OTC Markets Group". OTC Markets Group. Retrieved 8 August 2012. 
  6. ^ "OTC Markets 101 - Securities Lawyer 101". Hamilton & Associates Law Group. Retrieved 8 August 2012. 
  7. ^ Sharon, Justin (Aug 2, 2012). "In the Pink: OTC Stocks Offer Peril Along With Potential Profit". Minyanville. Retrieved 8 August 2012. 
  8. ^ "OTCQX | Qualified Foreign Exchanges". OTCQX INTERNATIONAL. Retrieved 8 August 2012. 
  9. ^ a b c d "OTCQX Requirements & Fees". OTCQX INTERNATIONAL. Retrieved 8 August 2012. 
  10. ^ a b "Learn — OTC Market Tiers". OTC Markets Group. Retrieved 8 August 2012. 
  11. ^ "OTC Markets Group Inc. (formerly known as Pink OTC Markets Inc.)". U.S. Securities and Exchange Commission. Retrieved 8 August 2012. 
  12. ^ a b AVERY, SIMON (November 24, 2011). "Canadian firms try different route to U.S. investors". The Globe and Mail. Retrieved 9 August 2012. 
  13. ^ "Learn — OTCQX Admission". OTC Markets Group. Retrieved 8 August 2012. 
  14. ^ a b "OTCQX Requirements & Fees". OTCQX U.S. Retrieved 8 August 2012. 
  15. ^ "OTCQB New Listing Requirements". OTC Markets. 16 April 2014. Retrieved 25 April 2014. 

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