OTC Markets Group Inc.

Allocated Loss Adjustment Expenses (ALAE)

What is OTC Markets Group Inc.?

The OTC Markets group is the owner and operator of the largest electronic trading and trading system between the United States for OTC securities. It offers markets to trade over 10,000 over-the-counter securities

The company provides services in three essential areas that are essential for better informed and more efficient financial markets. The fields are Trading Services, Market Data and Corporate Services.

OTC Markets Group was preceded by the National Quotation Bureau which was founded in 1913. Before being called OTC Markets Group Inc., the National Quotation Bureau renamed itself Pink Sheets LLC in 2000, then Pink OTC Markets in 2008. The change to The name of the OTC Markets group happened in 2020.

Key points to remember

  • OTC Markets Group is the largest U.S. market for OTC securities with more than 10,500 listed securities in 2019.
  • OTC securities are listed in three levels: OTCQX which has the strictest registration requirements, OTCQB which is the venture capital market and OTC Pink which includes companies in financial difficulty or bankruptcy.
  • Of the three levels, the pink OTC is the most important in terms of number of companies and volume of trade.

Understanding OTC Markets Group Inc.

Most over-the-counter transactions in the United States are processed on the company’s OTC Link platform, an alternative trading system registered with the Securities and Exchange Commission (SEC) as a broker. OTC Markets Group is headquartered in New York and is listed on the OTCQX market under the symbol OTCM.

Through the Trading Services Division, OTC Markets Group connects brokers who provide the liquidity and infrastructure necessary to execute transactions in the over-the-counter market.

The Market Data division provides data and quotation services for more than 10,000 OTC securities.

The Corporate Services division helps companies to become public and gain visibility thanks to their listing in one of the three OTC Markets Group levels.

Level structure of the OTC Markets group

The most visible aspect of the management of the OTC Markets group is the breakdown of the OTC market into three levels, depending on the quality and quantity of information and disclosures by listed companies. This multi-level structure offers different levels of transparency, so that investors know what types of information they have and do not have for each company they wish to trade.

  • OTCQX is the top level of the three markets for OTC stock trading. The actions that are traded on this forum must meet stricter qualification criteria than the other levels. Also called the cheapest OTCQX, it includes a large number of blue chip stocks from Europe, Canada, Brazil and Russia. These large foreign stocks are often names of global households. Penny shares, shell companies and bankrupt companies cannot claim to be listed on the OTCQX.

  • The intermediate level is called OTCQB, also known as “The Venture Market”, which consists of American and international start-up and developing companies that are not yet able to qualify for the OTTCQX. The business must be up to date in its reports, undergo an annual audit, a management certification, meet a bid test of $ 0.01 and not be bankrupt to meet the eligibility standards. The companies listed here are under the control of a United States regulatory agency such as the SEC or the Federal Deposit Insurance Corporation (FDIC). The OTCQB replaced the OTC Bulletin Board (OTCBB), operated by the Financial Industry Regulatory Authority (FINRA), as the main market for over-the-counter securities under the control of a US regulator. As it has no minimum financial standards, the OTCQB includes shell companies, penny stocks and small foreign issuers.
  • OTC Pink, or Pink Sheets, is the lowest and most speculative of the three markets for over-the-counter stocks. This marketplace offers trading in a wide range of stocks and includes companies in default or in financial difficulty. Since it has no disclosure obligation, the categorization of OTC Pink companies comes from information provided by the company. OTC Markets somewhat euphemistically advertises OTC Pink as “the open market with variable reporting companies”.

OTC Markets Group Inc. Trading Statistics

With more than 10,600 securities listed by the OTC Markets group in May 2019, the volume of daily transactions fluctuates. The volume of trade in dollars generally exceeds $ 1 billion per day, the volume of stocks will often reach five billion or more, and the number of transactions will often be north of 150,000. These statistics relate to the three levels combined.

The OTC Pink is the highest level in terms of the number of listed companies. It also generally accounts for around 70% of the daily transaction volume mentioned above.

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