Understanding the OTC Market tiers

OTC Markets

In today’s economy, mentioning the OTC Markets generally creates a feeling of uneasiness. Investors are suspicious of this marketplace because they are afraid of shell companies, a lack of transparency, low liquidity, and much more. However, when Cromwell Coulson acquired the National Quotation Bureau in 1997, he had a vision of transforming the marketplace into an industry leader. Coulson implemented a number of innovative changes to the company, now called OTC Markets Group. Among these changes is the three tier system of organization for the stocks quoted by OTC Markets: OTCQX, OTCQB, and OTCPink. OTC Markets organizes its almost 10,000 securities into these tiers based on opportunity and risk, providing enhanced clarity, transparency, and disclosure.

The OTCQX market (The Intelligent Market) is the top-tier marketplace. Companies in this tier exhibit the high quality financial standards and have their information readily available.

The OTCQB market (The Venture Market) is the middle-tier marketplace. Companies in this tier are not held to certain financial standards, but they are current in their financial reporting.

The OTCPink market is the bottom-tier marketplace. Companies in this tier are the riskiest as deemed by OTC Markets. The companies are broken up into three categories: Pink Current Information, Pink Limited Information, and Pink No Information. The divisions are pretty self-explanatory, each based on the availability of the company’s financial information.

What do these divisions do?

In short, these tiers provide a higher level of transparency leading to an increase in investor confidence. By screening each stock in the marketplace, OTC Markets is able to pin point those stocks that stand out, and those that require scrutiny. By doing so, investors are able to better decide which companies are worthy of investment, which companies could be infrequently trading/reporting, and which are shell companies.

The tiers are just one way that OTC Markets Group is revolutionizing trading across the market and more specifically in the microcap arena.

 

To learn more about the OTC Market tiers, visit OTC Market Groups' website here.

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