The OTC Pink, now known as the Pink Open Market, is the most basic and risky level among the three platforms for trading over-the-counter (OTC) stocks. All three levels are managed by the OTC Markets Group. This market allows trading in a variety of stocks through any broker, including firms that are in default or facing financial issues.
Because there are no disclosure requirements, the classification of companies on the OTC Pink relies on the information they provide. While OTC Markets Group promotes it as the Pink Open Market now, the old name is still commonly used.
Learn more about OTC Pink
The over-the-counter (OTC) market is a decentralized space where securities that aren’t listed on major exchanges are traded directly among a network of dealers. Unlike the NYSE, which matches orders, these dealers keep inventories of securities to handle buy and sell requests. The term “Pink Sheets” comes from the fact that information was originally printed on pink paper.
The OTC Pink, along with its sister tiers, OTCQX and OTCQB, is managed by OTC Link. This is an electronic system created by OTC Markets Group that allows broker-dealers to quote and trade securities. Registered with the SEC as a broker-dealer, OTC Link also functions as an alternative trading system (ATS).
With OTC Link, broker-dealers can not only share their quotes but also negotiate trades using the system’s messaging features. This capability allowed it to take over from the Over-the-Counter Bulletin Board (OTCBB), which was just a quoting system.
On November 8, 2021, the Financial Industry Regulatory Authority (FINRA) decided to shut down the OTC Bulletin Board (OTCBB) and remove all related rules from its regulations.
Who’s a Good Fit for Investing in OTC Pink?
OTC Pink offers a transparent trading environment and aims for the best execution, but keep in mind that it lacks financial standards and disclosure rules. This marketplace features a variety of companies, both domestic and international, including penny stocks, shell companies, distressed firms, and those that choose not to share information with investors.
Due to the absence of reporting obligations, this space is really only suitable for professional and savvy investors who can handle high risks. It’s crucial for investors to do their homework by researching the companies they’re interested in and looking into all their business activities.
Conclusion
The old terms for OTC Pink or Pink Sheets have been updated, along with some regulatory changes. Now known as Pink Markets or Pink Open Market, this is an over-the-counter trading platform for stocks that aren’t on the big exchanges. It usually features smaller companies, foreign businesses, or those wanting to avoid heavy regulations. While it can be a playground for speculators and investors looking for alternatives to the usual markets, it comes with major risks like scarce financial info, high volatility, and the chance of fraud. Recent regulatory updates are trying to boost transparency and lower risks in this speculative space.