What is OTCBB (Over-The-Counter Bulletin Board)

What is OTCBB (Over-The-Counter Bulletin Board)

The Over-The-Counter Bulletin Board (OTCBB) is a paid service for traders provided by the National Association of Securities Dealers (NASD). This service offers traders and investors real-time quotes, last-sale prices, and volume information for trading securities outside the main exchanges. All companies registered in this system must provide current financial reports to the U.S. Securities and Exchange Commission (SEC) or other regulators. Unlike listings on Nasdaq or the New York Stock Exchange (NYSE), the OTCBB has no listing requirements.

The OTCBB began operations in 1990 following the passage of the "Penny Stock" Reform Act. The reform required the SEC to develop a type of electronic quotation system for stocks that could not be listed on any of the world's major exchanges. Individuals trade these stocks over-the-counter using computers and telephones. Stocks traded on the OTCBB are marked with the suffix ".OB".

When investing capital in OTCBB stocks, investors should consider that these stocks are not part of any major exchange. Trading volumes for such stocks are minimal, and they are known for their volatility and high risks. Not all OTCBB stocks successfully transition from the over-the-counter market to Nasdaq or other major exchanges, as they often fail to meet listing requirements. Such stocks are typically illiquid, traded infrequently, and have large bid-ask spreads.

The over-the-counter market is an excellent opportunity for smaller companies that cannot make it to major stock exchanges due to not meeting listing requirements. For traders who decide to invest capital in OTCBB stocks, it is crucial to remember that the Over-The-Counter Bulletin Board is not a full-fledged exchange. It is merely a paid service. All securities listed on the OTCBB are, in fact, traded through a network of market makers who post various quotes and execute trades through a secure computer network available only to subscribers.

In some cases, even you can act as a market maker.

Often, beginners fail to distinguish between the OTCBB and "Pink Sheets." In reality, they are two different entities. "Pink Sheets" is a private company that provides its own quotation system. Furthermore, investors trading on "Pink Sheets" are not required to file reports with the SEC or disclose any financial documents to the public. Because of this anonymity, the "Pink Sheets" trading scheme is often chosen by smaller companies.

For a more detailed study and mastery of the trader profession on the stock market, you can take a basic training course and test your skills in practice by opening a demo account.