Page 186 - Initial Public Offering - An Introduction to IPO on Wall Street

OTC Networks

OTC Markets is a term used for stock exchanges that offer more than ten thousand securities
over-the-counter. Although they are frequently perceived as one major financial market, three
different stock exchanges list over-the-counter stocks. The following are three different OTC
exchanges or networks.

OTCQX

This is the most exclusive of the three, with just 4% of all listed OTC stocks traded on this
exchange. It has the highest levels of reporting and strictest regulation and typically consists
of international companies that list internationally on major exchanges, as well as certain U.S.
companies that ultimately intend to list on the NYSE or NASDAQ.

OCTQB

The middle tier, the OTCQB, is also referred to as the "venture market," with a significant
concentration of businesses that are growing. OTCQB firms have to disclose their financials
and submit to some scrutiny.

Pink Sheets

There are no reporting provisions for businesses trading on the Pink Sheets and they do not
have to file with the SEC. While Pink Sheets do feature some legitimate businesses, this is
where you can find several shell corporations and other businesses with no real business
operations. You will find most of the stocks that match the description of penny stocks on the
Pink Sheets

Real-World Examples of OTC Stocks

The operator of the financial markets for OTCQX is the OTC Markets Group.
'OTCMarkets.com' lists the firms most frequently traded, as well as advances and decliners
details. On a particular day, with over six billion shares changing hands, the overall dollar
volume may surpass $1.2 billion.

Some of the most prominent companies trading over-the-counter (OTC) include the
healthcare company Bayer A.G. (BAYRY), beverage giant Nestle SA (NSRGY), and
Chinese multimedia company Tencent Holdings LTD (TCEHY).

How to Trade OTC Stocks

The method of purchasing OTC stocks is relatively simple. You can buy and sell OTC stocks
from most big online brokers since they trade just like most other stocks. To get shares of an
OTC stock, one needs to know the business's ticker symbol and have sufficient money in
their brokerage account to purchase the required number of shares.

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