There is OTC and there is OTC. Discussing OTC as being a single entity is not appropriate.
Canada, USA March 2 2011
If your company is listed or contemplating a listing on the Toronto Stock Exchange (the “TSX”) or the TSX Venture Exchange (the “TSXV”) and you are interested in cross-listing the securities of your company on a U.S. stock exchange, there is an alternative to the traditional stock exchange listings on the NYSE or NASDAQ. You may consider supplementing your company’s TSX or TSXV listing with a listing2 on the OTCQX. The OTCQX is not a stock exchange, but is a broker-dealer trading platform. The advantages of listing on the OTCQX include: (1) greater liquidity for investors in both U.S. and Canadian marketplaces; (2) increased transparency for trades executed in the U.S.; and (3) lower costs than listing on a traditional U.S. stock exchange.
About OTCQX
The OTCQX heralds itself as the premier tier of the U.S. over-the-counter (the “OTC”) marketplace operated by OTC Markets Group Inc. (“OTC Markets Group”). The OTC market in the U.S. has seen rapid changes over the past few years that have made OTC trading more transparent and efficient. OTC Markets Group developed a number of OTC market tiers for different types of companies: the quality-controlled OTCQX marketplace, the U.S. registered and reporting OTCQB marketplace, and the OTC Pink Sheets marketplace for speculative trading.
Advantages of OTCQX Listing
Greater Liquidity – Canadian issuers may experience significant increases in trading volume after cross-listing on the OTCQX due to trading activity by U.S. investors and brokers via the OTCQX.
Increased Transparency – The OTCQX is a fully electronic trading platform that is similar to the NYSE and NASDAQ and is accessible to all investors – professional and retail. Investors can view real-time quotes online which are publicly available on the website of OTCQX at www.otcqx.com.
Lower Costs – Canadian issuers remain subject to existing disclosure requirements in their jurisdictions rather than being required to file with the Securities and Exchange Commission (the “SEC”).
Listing Requirements
Generally, a Canadian reporting issuer may qualify for a listing on the OTCQX by satisfying OTCQX listing criteria and applicable U.S. securities law requirements. For Canadian reporting issuers, the requirements include financial criteria set by the OTCQX as well as the following:
the company must be listed on the TSX or theTSXV for a period of at least 40 days;
the company must either (1) have a class of its securities registered under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) or (2) be eligible to rely on the exemption from the Exchange Act registration provided by Rule 12g3-2(b) (the “Rule 12g3-2(b) Exemption”);
the company must appoint a Principal American Liaison (“PAL”) sponsor to help with the listing process and conduct an annual review of the company’s posted disclosure. The PAL must be an approved U.S. attorney, investment bank or, if the company plans to list its securities in ADR3 form, an approved ADR Depository; and
the company must have proprietary priced quotations published by a market maker in OTC Link (which is an electronic interdealer quotation system operated by OTC Markets Group); and the company must be included in a securities manual published by Standard and Poor’s or Mergent (formerly known as Moody’s).
