Legal, you are correct.
The OTC or penny stocks do not trade the same as the big boards. What we see on L-2 is often for MM's to lure the public into buying and selling one direction. They are not obligated to fill your order all at once. Some fail to set the parameters as a Buy All or None. If not, say you place a 1 million buy limit .0096. It may take only 5,000 shares and then you have to move the limit up and pay another commission or wait until it takes. But it you do make sure it is all or nothing, then they take the million or you move it up, but only pay 1 commission.
And most traders fail to realize that not all you see on L-2 are real buy and sell orders. MM's can trade stock between themselves. So seeing 6 orders at the bid and 1 order at the ask may only try to entice the public to buy and vice versa.
Say that the 6 buys only total 100k shares and the bid(sell) has 5 million. We cannot tell on the OTC what they actually are. People usually jump at the ask because there is 6 bids and only 1 ask. The deceit is that not all have to be actual public orders ! And it is presented to have people buy into the larger number that is selling. Make sense? MM's can see all orders coming in L-3. The MM's are in complete control of what the public can view.
Same with the 999 and 100 we see in penny L-2's. They stand out when all the rest are 50. OTC's are not regulated the same way, so they can get away with the tactics. Big board stocks post the actual orders.
* difference is that in the OTC, there DOES NOT always have to be a buyer and a seller. MM's take in and distribute shares as they wish. This opens the door to the public being played, imo.
Limit Order Display The Limit Order Display Rule (SEC Order Handling Rules) requires a market maker that receives a customer limit order priced at or better than its current quote and that does not immediately execute the order, to display the order to the entire marketplace. Alternatively, the Market Maker can choose to send the order to another Market Maker or ECN for display. There is no limit order display rule on the OTCBB.
