OTCBB vs. the Pink Sheets
There are two primary platforms for the listing of over-the-counter securities. The first is the OTCBB and the second is the pink sheets platform. Nasdaq operates the OTCBB which acts as a quotation service for over-the-counter sales. Shares are further divided between the OTCQX and the OTCQB platforms.
Pink Sheets is a private listing company for over-the-counter securities.2??
OTCBB Listings
There are comparatively few barriers to entry on the OTC markets. OTC-Link places no restrictions on securities that may be listed, and OTCBB requires only that updated financial reports be properly filed with the SEC, banking regulators, or insurance regulators.3??? These OTC markets give brokers and dealers a mechanism to list their current bidding and asking prices to complete transactions.
Many OTC stocks are issued by companies that are too small in size to be listed on a major U.S. exchange. They may find the $500,000 NYSE listing fee, or the $75,000 Nasdaq fee, to be a financial barrier.4?5???
Others have previously been listed on a major exchange but got kicked off it for failing to meet the exchange requirements. This can occur automatically when the company's share price falls below a set level, such as $1.
However, some very prominent foreign companies including the Swiss food conglomerate Nestle SA and the German pharmaceutical company Bayer A.G. use the OTC platform. They also list on their home exchanges and may find the duplication of regulatory paperwork too onerous.
Bonds and derivatives also find a listing home on the OTC marketplaces.
A penny stock refers to a small company's stock that trades for less than five dollars per share. Although some penny stocks trade on large exchanges such as the NYSE, most penny stocks trade via OTC or over the counter through pink sheet listings or the OTC Bulletin Board (OTCBB).
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