The New OTC Market Platform-Understanding the Market Tier System
June 27, 2011 Leave a comment
To our investors and any potential new investors we offer this blog post about the day thousands of public companies including NVIC were delisted from the Bulletin Board which caused uncertainty and confusion among many investors. The reason given for the delisting was failure to comply with Rule 15c2-11. This rule states that companies quoted on the OTCBB must maintain at least one registered market maker. The transition from a telephonic trading platform (the bulletin board) to an electronic platform (the OTC markets Groups three tier platform) caused the delisting of thousands of public companies when the market makers moved to the electronic platform. The reason for the move was financial. The market makers were charged $6.00 per security traded each month, so the market makers were finding it difficult to profit on companies with lower trading activity.
To date, over 95% of all broker/dealer quotations are now published on OTC Markets Group’s three-tier platform with the few remaining percent that are quoted exclusively on the Bulletin Boards hanging by a thread with only one of two market makers on each company.
The reality is that absolutely nothing has changed and the transition is by no means a signal that the company’s quality or SEC reporting status has changed. NVIC is still a fully reporting Company to the Security and Exchange Commission and we are still going about business as usual. However, confusion still exists because not all financial websites have updated their information systems to reflect the change. Popular websites such as Yahoo Finance, Google Finance, and many more have companies listed as “Pinksheets”. This is not an accurate description of the current OTC market platform.
There is a lack of public information about the OTC Market Group’s tiered system which consists of the OTCQX, OTCQB and OTC Pink and is designed to increase transparency and separate listed companies in a similar fashion to the tiers of the NASDAQ exchange.
The OTCQX is the first tier and carries financial standards and listing requirements similar to NASDAQ’s Capital Markets. The OTCQB is the second tier and companies must be current and fully-reporting to the SEC. The third tier is the OTC Pink where companies that are non-SEC compliant are relegated.
Tim Ryan, Managing Director at OTC Markets Group, Inc. has expressed his concerns over the integration of the new system by all financial websites and the confusion that is being created, but remained extremely optimistic about the future and new structuring of the OTC space.
As an investor, we encourage you to go the electronic platform by clicking here http://www.otcmarkets.com/home and read for yourself the requirements and the differences between the OTCQX, OTCQB and OTC Pink.