What are OTC Markets?
OTC or Over-the-Counter markets are US trading marketplaces that operate outside of traditional stock exchanges. They are decentralized and leverage a network of broker-dealers to connect buyers and sellers rather than the matching engine technology used by exchanges.
Three OTC market tiers
- OTCQX is considered the highest tier of OTC markets’ securities based on the amount of available information. Firms must be current on all regulatory disclosures, maintain audited financials, and cannot be a penny stock, a shell corporation, or in bankruptcy.
- OTCQB, also called the “Venture Market”, is designed for early-stage or growth companies. Companies must have a minimum bid price of $0.01, must be current in their regulatory reporting and have audited annual financials, and cannot be in bankruptcy.
- Pink Sheets is known as the Open Market and is the lowest tier of the OTC market. There are no minimum financial standards, and it can include a wide variety of companies, including foreign companies, penny stocks, shell companies, and other firms that choose not to disclose financial information.
OTC market changes coming July 1
The evolution of the OTC market has seen the market go from paper Pink Sheets to regulated, real-time trading systems. Processes have been created to allow companies to verify their credentials, provide ongoing disclosure and demonstrate their compliance with federal and state securities laws. This provided companies with access to a wider range of brokers and investors.
The OTCQX and OTCQB have become widely accepted and understood by broker-dealers, regulators and investors. With an increase in standards of the OTCQX and OTCQB markets, there was the realization that the next step in organizing the markets would involve Pink Sheets.
Effective July 1, 2025, Pink Current will cease to exist and the OTC Markets Group will launch the OTCID Basic Market. OTCID will be for companies that publish baseline information, provide management certification, but do not meet the qualitative standards of the OTCQX and OTCQB markets.
Impact on issuers
Issuers that do not provide updated information, ongoing reporting and the required management certifications will see their securities transition to Pink Limited or the Expert Market.
Removing Pink Current and introducing the OTCID will make it clear which issuers are not providing updated information, ongoing reporting, and the required management certifications, confirming that the issuer has no ongoing relationship with the OTC Markets Group. However, once moved to the Pink Limited or Expert Market, it will still allow broker-dealers to serve clients willing to trade these securities.
Being “Pink” will act as a warning to investors of the potential for market imperfections, issuer information asymmetries and other risks of these orphaned securities.
With the upcoming changes, issuers currently listed on Pink Current could take proactive steps to transition to the new OTCID Basic Market. These steps include ensuring that they publish baseline information, provide management certification, and meet the qualitative standards required by OTCID1. Issuers must maintain transparency and compliance with the OTC Markets Group's guidelines to avoid being downgraded to Pink Limited or the Expert Market1. Transitioning to the OTCID Basic Market may provide benefits such as attracting investors and broker-dealers, ensuring their securities remain actively traded and accessible in the evolving OTC market landscape.
Please contact your Computershare Relationship Manager with any questions about the OTC Markets and the upcoming change to Pink Current listings.
Computershare is not providing, and does not intend to provide, any legal, tax or investment advice.
Jennifer Oliver
Relationship Manager, Issuer Services
