As FINRA's OTC Bulletin Board Closes Down, OTC Markets Group Becomes the Main Gateway Into the Regulated Over-the-Counter Market

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

On October 25, the Financial Industry Regulatory Authority (FINRA) announced the closing of its OTC Bulletin Board (OTCBB) by November 8, formalizing OTC Markets Group OTCM as the primary gateway into the over-the-counter (OTC) securities market.

Cromwell Coulson, OTC Markets Group CEO, had this to say about the recent change, “The end of the OTCBB era represents an opportunity for us to continue the evolution of our markets over the past 20-years, and the role we play as a commercial provider of regulated trading systems and services with FINRA as the SRO.”

The trading platforms that OTC Markets Group operates are not “exchanges”, but Alternative Trading Systems (ATS) that link broker-dealers to one another, allowing them to provide liquidity and execution services.

OTC Markets Group has undergone many transformative phases, starting in 1913 as the National Quotation Bureau (NQB). Over the past two decades, activity in OTC equity securities has migrated from the OTCBB to OTC Markets Group. Today, OTC Markets Group is a publicly-traded company OTCM and operates three markets: OTCQX® Best Market, OTCQB® Venture Market, and Pink® Open Market for over 11,000 U.S. and global securities. A broad spectrum of securities spanning many industries and sectors trade on these markets, including large multinational companies, community banks, innovators, and development stage companies.

OTC Markets Group’s standards are practical and cost-effective for issuers of all sizes and a diverse range of companies spanning across the globe leverage the OTCQX and OTCQB markets to provide transparency and access to U.S. investors. These include multinational giants such as Adidas AG ADDYY, Danone DANOY, and Roche Holding Ltd RHHBY.

Providing Access and Structure to the Over-The-Counter Equities Markets

OTC Markets Group categorizes securities that trade on its markets into 3 distinct tiers, based on the quality and availability of company disclosure. The standard of eligibility requirements becomes more lenient as one moves from the OTCQX® Best market to the OTCQB® Venture market and finally to the Pink Open Market.

To be part of the OTCQX®, companies must meet robust financial standards (not be a penny stock, shell company or a company facing bankruptcy), maintain corporate governance standards and publish regular public reports.

The OTCQB® has more accessible financial standards that accomodate early-stage U.S. and international companies, but maintains current public reporting, corporate governance, and other requirements. 

According to OTC Markets Group’s website: “The Pink Open Market provides brokers with a regulated platform for transparent trading and best execution. Brokers quote a wide spectrum of companies on this market, including foreign companies that limit their disclosure in the U.S., penny stocks, and shells. To be eligible for quotation on the Pink Market, companies must comply with the requirements of Securities Exchange Act Rule 15c2-11, including providing current information to the investing public.”

With the closure of the OTCBB, OTC Markets Group will continue to play an important role in the financial markets and provide a gateway into trading many securities of companies around the world.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.

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