Posted on 26 February 2012.
OTC Stocks are stocks that trade Over The Counter (OTC), which means that they trade outside of the major stock exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ stock exchange. While many OTC stocks are penny stocks, it is a misconception that all OTC stocks are penny stocks. There are many well established companies, many of which are based outside of the United States, that trade on the OTC markets in the United States and maintain share prices well above the $1.00 level.
OTC stocks trade on the Over The Counter Bulletin Board (OTCBB.com) and Pink Sheets (otcmarkets.com). The Over The Counter Bulletin Board and Pink Sheets are not stock exchanges because they do not have the strict listing requirements that companies must adhere to in order to list their shares on stock exchanges. The Over The Counter Bulletin Board and Pink Sheets are stock trading platforms that facilitate the trading of OTC stocks.
OTC stocks that trade on the Over The Counter Bulletin Board must be in compliance with United States Security and Exchange Commission (SEC) reporting requirements. Compliance with SEC reporting requirements is not required for OTC that trade on the Pink Sheets. It is the lack of reporting requirements that draws both domestic and foreign companies to trade as OTC stocks instead of stock exchange listed stocks. These companies trade as OTC stocks to avoid divulging too much information about their business operations and to avoid complying with expensive and time consuming stock market listing requirements.
OTC stocks can be bought and sold via all of the major stock brokerage firms. The main difference between the various stock brokerage firms in regards to trading OTC stocks is their commission schedules and how quickly they facilitate trading in OTC stocks. Like listed stocks, OTC stocks can be traded either online via a brokerage website, via a brokerage voice activated response service, or via live stock brokers. The online trading option is usually the least expensive and fastest trading option, when trading OTC stocks.
Stock alerts for OTC stocks can be found on many websites, including StockRockandRoll.com. Information about OTC stocks can be found on the Over The Counter Bulletin Board and Pink Sheets websites. Additional information about OTC stocks can be found on company websites and Internet message boards, on websites such as Investorshub. Investorshub can be particularly useful when trying to find out information about OTC stocks, since OTC stock traders and investors often maintain and update company information on message boards dedicated to specific OTC stocks.
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