The OTC, or "Over-the-Counter", market is not an organized marketplace or exchange. OTC is a catchall phrase for any market in an equity security that is not listed on a US exchange or on the Nasdaq Stock Market. OTC securities are issued by companies that either choose not to list, or are unable to meet the standards for listing, on NASDAQ or a US stock exchange.
OTC equity securities can be quoted on the Pink Sheets Electronic Quotation Service, and/or, if the securities are registered with the SEC and their issuers are current in their reporting obligation, on the OTC Bulletin Board. Some OTC securities are not quoted on either the Pink Sheets or the OTC Bulletin Board; these securities are sometimes referred to as gray market or "Other-OTC" securities. Because Other-OTC securities are not quoted on any quotation service, bid and ask quotations for these securities are not available. However, NASD rules require its members to report transactions in all OTC equity securities to Nasdaq, so last sale and volume information is available for all OTC securities, including those categorized as "Other OTC." The Pink Sheets is a centralized quotation service that collects and publishes market maker quotes for OTC securities in real time. Pink Sheets is neither a Securities and Exchange Commission (SEC) Registered Stock Exchange nor a Broker-Dealer. -----------------------
OTC Market Makers shall, within 90 seconds after execution, transmit through ACT last sale reports of transactions in OTC Equity Securities executed during normal market hours. Transactions not reported within 90 seconds after execution shall be designated as late.
Non-Market Makers shall, within 90 seconds after execution, transmit through ACT or the ACT service desk (if qualified pursuant to Rule 7010(i)), or if ACT is unavailable due to system or transmission failure, by telephone to the Nasdaq Market Operations Department, last sale reports of transactions in OTC Equity Securities executed during normal market hours. Transactions not reported within 90 seconds after execution shall be designated as late.
Transaction Reporting Outside Normal Market Hours
Last sale reports of transactions in OTC Equity Securities executed between 8:00 a.m. and 9:30 a.m. Eastern Time shall be transmitted through ACT within 90 seconds after execution and shall be designated as ".T" trades to denote their execution outside normal market hours. Last sale reports of transactions in OTC Equity Securities executed between the hours of 4:00 p.m. and 6:30 p.m. Eastern Time shall also be transmitted through ACT within 90 seconds after execution; trades executed and reported after 4:00 p.m. Eastern Time shall be designated as ".T" to denote their execution outside normal market hours. Transactions not reported within 90 seconds must include the time of execution on the trade report.
Last sale reports of transactions in OTC Equity Securities executed outside the hours of 8:00 a.m. and 6:30 p.m. Eastern Time shall be reported as follows: (i) Last sale reports of transactions in American Depositary Receipts (ADRs), Canadian issues, or domestic OTC Equity Securities that are executed between midnight and 8:00 a.m. Eastern Time shall be transmitted through ACT between 8:00 a.m. and 9:30 a.m. Eastern Time on trade date, be designated as ".T" trades to denote their execution outside normal market hours, and be accompanied by the time of execution. The party responsible for reporting on trade date, the trade details to be reported, and the applicable procedures shall be governed, respectively, by paragraphs (b), (c), and (d) below; (ii) Last sale reports of transactions in ADRs, Canadian issues, or domestic OTC Equity Securities that are executed between 6:30 p.m. and midnight Eastern Time shall be transmitted through ACT on the next business day (T+1) between 8:00 a.m. and 6:30 p.m. Eastern Time, be designated "as/of" trades to denote their execution on a prior day, and be accompanied by the time of execution. The party responsible for reporting on T+1, the trade details to be reported, and the applicable procedures shall be governed, respectively, by paragraphs (b), (c), and (d) below; and (iii) Last sale reports of transactions in foreign securities (excluding ADRs and Canadian issues) shall be transmitted through ACT on T+1 regardless of time of execution. Such reports shall be made between 8:00 a.m. and 1:30 p.m. Eastern Time in the same manner as described in subparagraph (3)(B)(ii) above.
All members shall report weekly to the Market Surveillance Department on Form T, last sale reports of transactions in OTC Equity Securities that were not transmitted through ACT, for whatever reason, either on trade date or the next business day. Form T shall be used exclusively as a back-up mode whenever electronic entry of trade data is not feasible due to system malfunctions or other unusual conditions.
A pattern or practice of late reporting without exceptional circumstances may be considered conduct inconsistent with high standards of commercial honor and just and equitable principles of trade, in violation of Rule 2110.*
Which Party Reports A Transaction
In transactions between two OTC Market Makers, only the member representing the sell side shall report.
In transactions between an OTC Market Maker and a Non-Market Maker, only the OTC Market Maker shall report.
In transactions between two Non-Market Makers, only the member representing the sell side shall report.
In transactions between a member and a customer, the member shall report.
Information To Be Reported Each last sale report shall contain the following information:
Symbol of the OTC Equity Security;
Number of shares;
Price of the transaction as required by paragraph (d) below; and
A symbol indicating whether the transaction is a buy, sell, or cross.
Procedures for Reporting Price and Volume Members that are required to report pursuant to paragraph (b) above shall transmit last sale reports for all purchases and sales in OTC Equity Securities in the following manner:
For agency transactions, report the number of shares and the price excluding the commission charged.
For dual agency transactions, report the number of shares only once, and report the price excluding the commission charged.
For principal transactions, except as provided in subparagraph (B) hereof, report each purchase and sale transaction separately and report the number of shares and the price. For principal transactions that are executed at a price which includes a mark-up, mark-down or service charge, the price reported shall exclude the mark-up, mark-down or service charge. Such reported price shall be reasonably related to the prevailing market, taking into consideration all relevant circumstances including, but not limited to, market conditions with respect to the OTC Equity Security, the number of shares involved in the transaction, the published bids and offers with size displayed in any inter-dealer quotation system at the time of the execution (including the reporting firm's own quotation), the cost of execution and the expenses involved in clearing the transaction.
Exception: A "riskless" principal transaction in which a Non-Market Maker, after having received from a customer an order to buy, purchases the security as principal from another member or customer to satisfy the order to buy or, after receiving from a customer an order to sell, sells the security as principal to another member or customer to satisfy the order to sell, shall be reported as one transaction in the same manner as an agency transaction, excluding the mark- up or mark-down.
Transactions Not Required To Be Reported The following types of transactions shall not be reported:
Transactions which are part of a primary distribution by an issuer or a registered secondary distribution (other than "shelf distributions") or of an unregistered secondary distribution;
Transactions made in reliance on Section 4(2) of the Securities Act of 1933;
Transactions where the buyer and seller have agreed to trade at a price substantially unrelated to the current market for the security;
Purchases or sales of securities effected upon the exercise of an option pursuant to the terms thereof or the exercise of any other right to acquire securities at a pre-established consideration unrelated to the current market.
------------------------------------------------------------------------------------------------ *Member firms that have the operational capability to report transactions in foreign securities (excluding ADRs and Canadian issues) within 90 seconds of execution, between the hours of 8:00 a.m. and 5:15 p.m. Eastern time, may do so at their option. If a firm chooses this option, it need not report the same transaction(s) on T+1 as prescribed by subparagraph (3)(B)(iii).
[Amended by SR-NASD-92-48 eff. Dec. 20, 1993; amended by SR-NASD-93-40 eff. Oct. 7, 1993; amended by SR-NASD-94-53 eff. Oct. 24, 1994; amended by SR-NASD-94-35 eff. Dec. 12, 1994.]
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