OTC Markets Group, Inc. (OTCQX: OTCM) operates Open, Transparent and Connected financial marketplaces for 10,000 U.S. and global securities. Through our OTC Link® ATS, we directly link a diverse network of broker-dealers that provide liquidity and execution services for a wide spectrum of securities. We organize these securities into marketplaces to better inform investors of opportunities and risks – OTCQX®, The Best Marketplace; OTCQB®, The Venture Marketplace; and OTC Pink®, The Open Marketplace. Our data-driven platform enables investors to easily trade through the broker of their choice at the best possible price and empowers a broad range of companies to improve the quality and availability of information for their investors. To learn more about how we create better informed and more efficient financial marketplaces, visit www.otcmarkets.com. OTC Link ATS is operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.
We at Stock News Now have interviewed more CEOs and C-suite executives with companies listed on either the OTCQX, OTCQB, OTC Pink than we can count, and will continue to do so – many MicroCaps are listed on one of the aforementioned marketplaces; OTCQX also includes many well-established U.S. and International companies as well. We wanted to check in with Cromwell Coulson, CEO of OTC Markets Group to discuss what’s happening over at OTC and the MicroCap market at large.
1. How many public companies are listed on the OTC Markets?
There are 10,000 securities traded on our OTCQX, OTCQB and OTC Pink marketplaces. These include more than 3,000 American depositary receipts (ADRs) and foreign ordinaries of global companies like Roche, adidas, Volkswagen and Shiseido, large-cap distressed companies like Fannie Mae and Freddie Mac, more than 650 U.S. community and regional banks and hundreds of U.S. and international entrepreneurial and development stage companies.
Our marketplaces have a broad range of U.S. and international companies at all stages of their development from entrepreneurial and development stage to established, global and growth.
2. How is OTC Markets able to grow at such a pace?
We are proud of our achievements. In the past 10 years, we have transformed an opaque and inefficient phone-based market into modern, electronic financial marketplaces with real-time price transparency and increased transparency of the companies that trade here. We have also segmented companies into three marketplaces – OTCQX, OTCQB and OTC Pink – based on their quality and quantity of disclosure to help investors make smarter investment decisions.
Today, you can buy and sell OTCQX, OTCQB and OTC Pink securities almost identically to NASDAQ or New York Stock Exchange-listed securities through your institutional, retail or online broker-dealer of choice. Companies also have access to services such as our Real-Time Level 2 Quotes and OTC Disclosure & News Service to help them provide better transparency to their investors.
We launched a few new initiatives in 2014, including stricter standards and eligibility requirements for our OTCQB Venture Marketplace, and streamlined standards for banks on OTCQX, our Best Marketplace. We also launched four new indexes for tracking the performance of U.S. and international OTCQX securities: the OTCQX30 Index, powered by BNY Mellon Indices, a benchmark for the 30 largest ADRs on OTCQX, and the OTCQX Composite Index, OTCQX U.S. Index and OTCQX International Index.
3. Who is your competition?
While we compete against NYSE and NASDAQ for more established companies, we are a clear leader when it comes to the operation of securities markets for OTCQX, OTCQB and OTC Pink securities. The OTC Bulletin Board, which is operated by FINRA, was previously a market for off-exchange traded banks, insurance companies and current SEC reporting companies, but the majority of market makers in those securities have migrated away from the OTCBB to our OTC Link ATS trading platform. Of the approximately 10,000 securities that trade off-exchange, less than 12 are quoted solely on the OTC Bulletin Board.
FINRA recently submitted a rule proposal to the SEC that would cease its operation of the OTC Bulletin Board and increase its regulation of us and other market operators providing services to this market. We support that proposal and look forward to the final proposal and to working with FINRA as our regulator now and in the future.
4. How does OTCM differ from the competition?
OTC Markets Group Inc. (OTCQX: OTCM) is an operator of financial marketplaces whose OTC Link ATS, an SEC regulated alternative trading system (ATS), electronically connects a diverse network of broker-dealers that trade OTCQX, OTCQB and OTC Pink securities. This network-based approach allows broker-dealers to leverage their substantial investment in their existing internal infrastructures, giving them greater control over the trading process.
In contrast, the NYSE and NASDAQ are national stock exchanges that serve as centralized intermediaries matching buyers and sellers of securities listed on their marketplaces.
OTC Markets Group and the national stock exchanges all offer trading for brokers, market data for investors and services for companies to help them improve transparency and increase their visibility with investors.
Ultimately, our mission is to create better informed and more efficient financial marketplaces and we are focused on delivering elegant, reliable and cost-effective solutions to improve trading, transparency and trust for brokers and companies.
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5. What are the key benefits to listing on the OTC Markets?
There are numerous benefits to going public on our three marketplaces as there are in any public trading market – access to capital, liquidity for shareholders, increased visibility with investors, a public market valuation and the ability to convey your company’s reputation to your shareholders, employees, customers, partners, vendors, news media and the public.
Companies that qualify to trade on our top two marketplaces – OTCQX and OTCQB – receive numerous additional benefits, including access to services to help them increase their visibility with investors and the opportunity to be included in our OTCQX and OTCQB indexes.
To qualify for OTCQX, companies must meet high financial standards, be current in their reporting and be sponsored by a professional third-party advisor. Penny stocks are not admitted to OTCQX.
To be eligible for OTCQB, companies must be current in their reporting, meet a minimum one penny ($0.01) bid price test and undergo an annual verification and management certification process, providing additional information about the company’s insiders, advisors and share count.
6. Your website, OTCMarkets.com seems user friendly for investors, was that by design?
Thank you for the positive feedback on our site! We designed our website to meet the needs of investors researching, analyzing and trading OTCQX, OTCQB and OTC Pink securities as well as companies looking for information on our marketplaces and services.
We are proud to say our website receives approximately 400,000 unique monthly visitors, including investors, companies and news media such as SNN.
7. Can you explain the general process for a company listing on the OTC Markets?
The process for getting traded on our OTCQX, OTCQB and OTC Pink marketplaces is different than the process for listing on NASDAQ or the New York Stock Exchange in that companies don’t list their own stock for trading. Rather, a broker-dealer must “sponsor” a security for trading by submitting a Form 211 with FINRA. If the Form 211 is approved, after 30 days the newly-quoted stock will become “piggyback qualified,” meaning any broker-dealer can begin quoting the security.
There are additional qualifications for trading on our OTCQX and OTCQB marketplaces which I detailed above.
8. How easy is it to up list within the OTC Markets?
There are different standards for trading on our various marketplaces with varying levels of scrutiny and requirements, the most stringent being for our best marketplace, OTCQX. That said a company that qualifies for a higher marketplace and already has a relationship with us - those that subscribe to one of our services – can find the process relatively easy and quick, one or two weeks at the most. Companies that don’t already have a relationship with us can find the process takes a little longer as we need to verify the company, company officers and other information. We do some level of background check on all our subscribers, the most in-depth being with OTCQX companies.
OTC Pink and OTCQB companies that are interested in upgrading to OTC Pink Current Information, OTC Pink Limited Information, OTCQB or OTCQX should visit the “Learn” section of our website where they can find detailed lists of requirements and downloadable applications.
9. What services other than listing does OTC Markets provide?
We provide numerous corporate services to companies to help them increase their visibility and engagement with investors. Our OTC Disclosure & News Service allows companies to immediately distribute their news, financial disclosure, research reports, videos and investor presentations to investors, and meet regulatory and compliance requirements. The service is integrated with most of the major press release distribution services, including BusinessWire, GlobeNewswire, Marketwired and PR Newswire, allowing for concurrent distribution of news releases to an expansive global audience.
We also offer a service for helping companies gain Blue Sky compliance in more states. Blue Sky laws are U.S. state laws that regulate the offer and sale of securities to protect investors from fraud. Securities that are not listed on NASDAQ or the NYSE do not have automatic “Blue Sky” exemption across the 50 states and U.S. territories, so we offer services to help these companies monitor their Blue sky compliance. We will even help companies file registration documents for secondary trading where an exemption is unavailable.
Our Real-Time Level 2 Quote Service allows companies to sponsor free real-time level 2 quotes for their investors on our website, a feature that is enjoyed by many individual investors and traders.
We also offer several free, basic investor relations services to companies through OTCIQ.com, our market intelligence and investor relations portal, including a weekly market activity report for monitoring their trading.
10. How bright do you see the future for OTC Markets?
The future is very bright for OTC Markets Group. Our core strategy of sharing information widely through open networks that connect brokers, organize marketplaces and inform investors is continuing to grow the business.
We are pleased with the progress of OTCQB, our venture marketplace, which is now up to more than 300 verified OTCQB companies. Our goal is to transform OTCQB into “America’s venture marketplace” similar to the TSX Venture Exchange in Canada and London’s AiM market and we are well on our way.
I am also excited about the success of OTCQX for banks, our new streamlined reporting requirements for banks on our OTCQX marketplace. We now have 39 U.S. community and regional banks on OTCQX ranging from a few hundred million in assets to $1.5 billion in assets. This year, we plan to launch an OTCQX banks index to track the performance of small- and mid-sized banks across the nation.
Meanwhile, our OTCQX marketplace continues to attract interest from international companies that are looking to increase their engagement with U.S. investors without the duplicative regulatory requirements of a U.S. stock exchange listing. New global companies that joined OTCQX in 2014 included Heineken N.V. and Heineken Holding N.V., Shiseido Company Ltd., Cyrela Brazil Realty S.A. and Technicolor.
We will continue to expand our network and the distribution of our market designations to more sites and financial portals so investors and broker-dealers can easily identify a security’s financial strength, disclosure level and risk profile. Already, many of the major financial portals are displaying our data including CNBC.com, CNN Money, MSN Money and Seeking Alpha.
Next year, our OTC Link ATS will be regulated under Regulation Systems Compliance and Integrity (Reg SCI) that will further cement our role as mission critical entity in the U.S. securities market.
In short, we have a bright future and many great years ahead for OTC Markets Group.
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