The OTC Bulletin Board or OTCBB is an interdealer electronic quotation system in the United States that displays real-time quotes, last-sale prices, and volume information for many over-the-counter (OTC) equity securities that are not listed on the NASDAQ stock exchange or a national securities exchange. Broker-dealers who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities. According to the SEC, "fraudsters often claim or imply that an OTCBB company is a Nasdaq company to mislead investors into thinking that the company is bigger than it is."[1]
Although FINRA oversees and runs the OTCBB, the OTCBB is not part of the NASDAQ stock exchange. In September 2009, FINRA announced that it would be selling the OTCBB.[2] OTCBB formerly collected 100% of quotes, but that number has declined with the rise of its competitor Pink OTC Markets, which is the leading contender for purchasing the OTCBB.[3] In response to the decline of its OTCBB system, FINRA has proposed a "quotation consolidation system" under which it requires dealers to report their quotes to it; Pink OTC argues this is anti-competitive and an abuse of FINRA's authority.[3]
Companies quoted on the OTCBB must be fully reporting (i.e. current with all required SEC filings) but have no market capitalization, minimum share price, corporate governance or other requirements to be quoted. Companies which have been "de-listed" from stock exchanges for falling below minimum capitalization, minimum share price or other requirements often end up being quoted on the OTCBB.
Stock of non-reporting companies (those without current SEC filings) may be quoted in the Pink Sheets. Most OTCBB companies are dually quoted, meaning they are quoted on both the OTCBB and the Pink Sheets.
Stocks traded in OTC markets such as the OTCBB or Pink Sheets are usually thinly traded microcap or penny stocks, and both retail and institutional investors generally avoid them, because of fears that share prices are easily manipulated and there exists a potential for fraud. The SEC issues stern warnings to investors to beware of common fraud and manipulation schemes. As such, most companies choose to list on more established exchanges such as the AMEX, NYSE, or NASDAQ once eligible.
references:
http://en.wikipedia.org/wiki/OTCBB
- ^ SEC warning
- ^ Over-the-Counter Bulletin Board (OTCBB) Sale Announcement. OTCBB.com
- ^ a b FINRA Proposal Riles OTC Market. Traders Magazine
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