OTC Markets Group: What it is, Structure, FAQs

What Is OTC Markets Group Inc.?

The OTC Markets Group is the owner and operator of the most substantial U.S. inter-dealer electronic quotation and trading system for over-the-counter (OTC) securities. It provides marketplaces for trading more than 11,500 OTC securities.

Understanding OTC Markets Group Inc.

OTC Markets Group Inc. provides services in three core areas that are essential for better-informed and more efficient financial markets. The fields are trading services, market data, and corporate services.

Through the trading services division, OTC Markets Group connects broker-dealers together which provides the liquidity and infrastructure for executing trades on the OTC market. The market data division provides data and quote services for more than 11,500 OTC securities. The corporate services division helps companies go public and gain greater visibility through listing in one of OTC Markets Group's three OTC tiers.

The company was preceded by the National Quotation Bureau, which was founded in 1904. Prior to being called the OTC Markets Group Inc., the National Quotation Bureau renamed itself Pink Sheets LLC in 2000 and then Pink OTC Markets Inc. in 2008. The change to the OTC Markets Group name came in 2011.

The handling of most OTC securities trading in the U.S. is on the company’s OTC Link platform, an alternative trading system registered with the Securities and Exchange Commission (SEC) as a broker-dealer. OTC Markets Group has its headquarters in New York City and is publicly traded on the OTCQX marketplace under the symbol OTCM.

As of March 7, 2022, the dollar volume is $219 million and the share volume is $1.4 billion. These stats are for all three tiers combined. The OTC Pink is the largest tier in terms of the number of companies listed within it.

OTC Markets Group Inc. Tier Structure

The most visible aspect of the OTC Markets Group's stewardship is the breakdown of the OTC market into three tiers, based on the quality and quantity of the listed companies’ information and disclosures. This tiered structure provides different levels of transparency, so investors know what type of information is available for each company they wish to trade.

OTCQX

OTCQX is the top tier of the three marketplaces for the OTC trading of stocks. Stocks that trade on this forum must meet more stringent qualification criteria compared to the other levels. Also called the OTCQX Best Market, it includes a large number of blue-chip stocks from Europe, Canada, Brazil, and Russia. These large foreign stocks are frequently global household names. Penny stocks, shell companies, and companies in bankruptcy cannot qualify for a listing on the OTCQX.

OTCQB

The middle tier is called OTCQB, also known as the Venture Market, which consists of early-stage and developing U.S. and international companies that are not yet able to qualify for the OTCQX. The company must be current in its reporting, undergo an annual verification, management certification, meet a $0.01 bid test, and must not be in bankruptcy to meet eligibility standards.

Companies listed here report to a U.S. regulator such as the SEC or Federal Deposit Insurance Corporation (FDIC). The OTCQB replaced the Financial Industry Regulatory Authority (FINRA)-operated OTC Bulletin Board (OTCBB) as the main market for trading OTC securities that report to a U.S. regulator. Because it has no minimum financial standards, the OTCQB includes shell companies, penny stocks, and small foreign issuers.

OTC Pink

OTC Pink, or Pink Sheets, is the lowest level and most speculative tier of the three marketplaces for the trading of over-the-counter stocks. This marketplace offers trading in a wide range of equities and includes companies in default​​​​​​​ or financial distress.

Because it has fewer disclosure requirements, the categorization of OTC Pink companies is from information provided by the company. Note that as of Sept. 28, 2021, OTC Pink (as well as all other OTC Markets Group lines) will require companies on the platform to provide up-to-date disclosures, pursuant to SEC Rule 15c2-11.

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