Pink, or the Open Market, is the most speculative and loosely regulated of the three marketplaces for trading over-the-counter (OTC) stocks electronically through a 澳洲幸运5官方开奖结果体彩网:broker-dealer network.

Pink market companies do not have the same criteria to fulfill as the companies listed on national stock exchanges, such as the New York Stock Exchange (NYSE), or even more stringently regulated OTC markets such as the OTCQX. Many of them are low-priced 澳洲幸运5官方开奖结果体彩网:penny stocks that trade for under $5 a share.

These companies used to be known as pink sheets because the quotes of their share prices were once published on pink-colored paper. Today, they are managed by the 澳洲幸运5官方开奖结果体彩网:OTC Markets Group.

Pink Market Listing Requirements

OTC Market Group has three regulated main marketplaces for trading OTC stocks: OTCQX, OTCQB, and the Pink market. The Pink market is the easiest one to get into. Broker-dealers can trade securitie🍷s here without c♉ompany involvement.

All a company needs to do is submit electronic Form 211, which is provided by the 澳洲幸运ജ5官方开奖结果体彩网:Financial Industry Regꦚulatory Authority (FINRA). Usually, this is done on behalf of a company by a 澳洲幸运5官方开奖结果体彩网:market maker. The form asks for current financiaღl information.

Pink Market Disclosure Rules

It's also now necessary for Pink market companies to update investors about their performance. Broker-dealers and other market makers are no longer able to publish quotations for stocks that do not provide publically available information about their financials according to the guidelines set out by OTC Market Group. That was part of an amendment made to Rule 15c2-11.2 in 2020.

Failure to abide by these rules could lead to getting moved from the Pink market to the Expert market, where there are no public broker-dealer quotations.

Disclosure requirements include publishing quarterly and annual financials, which don't need to be audited but must be prepared according to U.S. GAAP or International Financial Reporting Standards (IFRS). This is key information that helps financial professionals and investors make decisions when evaluating a company as a potential investment. Without it, it can be very difficult—if not nearly impossible—for an average investor to get any real information regarding these companies.

Disclosure requirements have made the Pink market much more transparent than before. However, it's still not comparable to national stock exchanges or even other OTC exchanges such as OTCQX or OTCQB. Generally, the more requirements placed on companies, the harder it is for them to be shady and dupe investors.

Advantages of the Pink Market

The biggest advantage of trading in the Pink market is that many of the companies are very inexpensive per share—some cost even less than $1. Because of this, even penny moves can mean a great return for an investor because of the higher volatility levels.

Being early to a part𝔉y may not be hip, but being early on a rising stock certainly is. In the Pink market, you can invest in a small company that may not be n🔜ationally known. Investing in this company can be quite profitable if it continues to grow; it may even end up on a major exchange in the future.

Another advantage is finding a once-strong company that has subsequently been beaten down. If a company was once listed on a major exchange like the NYSE but has been delisted because it no longer meets certain requirements, an investor could buy shares of that company with the hope it could make a comeback. Usually, a company is delisted because of a major financial event th🌸at makes the company's future bleak.

Some big-name foreign companies also trade on the Pink market, including Chinese multimedia company Tencent.

Disadvantages of the Pink Market

One should not forget that there are many disadvantages for investors to consider as well. First and foremost is limited information. These companies don't need to report as much information to investors. This can make it difficult to know what you're buying and how the company is doing over time.

Thinly traded companies are another disadvantage. Sure, you can buy 1,000 shares of the next Microsoft, but what if you made a nice profit and want to sell? When a stock is thinly traded, the chances of getting out without driving the price down are slim. No matter what the market, if you can't find a buyer, you won't get out of your position, and this is an even more difficult situation when it comes to Pink market companies. 澳洲幸运5官方开奖结果体彩网:Bid-ask spreads aꦬre very high, and high bid-ask spreads can make it difficult to initiate a position in the stock.

Investors also have to be aware that these companies are not usually covered by analysts. If you read or watch financial media, they rarely (if ever) cover a company that is not listed on a major exchange. This requires a lot more 澳洲幸运5官方开奖结果体彩网:due diligence on the part of the investo🎉r to locate information. Of course, that information may or may not be worthwhile in the end.

The Other OTC Markets

OTC Market Group has several regulated main marketplaces for trading OTC stocks: OTCQX, OTCQB, and the Pink market. Each of these markets has varying levels of financial standards and regulatory oversight. The OTCQX carries the most stringent requirements, followed by the OTCQB, and then the Pink market.

There's also the Expert market, which provides the lowest level of disclosure and, subsequently, trading is limited to quotation on an unsolicited basis.

OTCQX

The OTCQX, also known as the Best Market, is made up mainly of blue-chip stocks from overseas. Shell companies, penny stocks, and those facing bankruptcy cannot trade on this market.

OTCQB

The middle tier, known as OTCQB or the Venture Market, consists of early-stage and developing U.S. and international companies not yet able to qualify for the OTCQX. To qualify, companies must be current in their reporting, undergo an annual verification and management certification process, meet a $0.01 bid test, and not be in bankruptcy.

Companies that don't qualify for one of the two markets above, go into the Pink market or, worse, the Expert market.

OTC Market Classifications

Limited Information

These are companies that꧃ fit one of the following🐷 criteria:

• They have information that is available to the general public, but is older than six months and does not usually conform to the Pink market guidelines.
• They have filed with the SEC but have not updated their information.
• They have filed information with the OTC Disclosure and News Service. They must have at a minimum, a 澳洲幸运5官方开奖结果体彩网:balance sheet, 澳洲幸运5官方开奖结果体彩网:income statement, and shares outstanding within the last six months.
• They have gone bankrupt. Newly bankrupt companies are required to file information with the OTC Disclosure and News Service promptly.

Dark/Defunct

These types of companies will fall into this memorably named ♍🉐tier:

• Gray Market: The symbol for the 澳洲幸运5官方开奖结果体彩网:gray market is an exclamation point. Companies in this category do not have a market maker or market transparency. Trades in this category are made by a broker-dealer and reported to their 澳洲幸运5官方开奖结果体彩网:self-regulatory organization (SRO). The SRO will distribute the trade information, which is how prices can be tracked.
• No Information: The Pink Open Market previously had a category of No Information securities, which identified companies that were defunct or had not filed any information with either the SEC or the OTC Disclosure and News Service in six months, warranting caution for investors. In 2021, following updated SEC transparency rules, securities that were once labeled “No Information” moved to OTC Market Group’s Expert Market, which is only available to broker-dealers and other professional investors, not to the general public. They are not promoted as investment options for average investors. 

Toxic

This tier advertises its extreme risk level by having a skull-and-crossbones symbol. There is only one category in this 🍬group:

• Caveat Emptor. Here, the title says it all: "buyer beware." The Caveat Emptor tier is described as consisting of stocks that are the subject of unsolicited spam, questionable promotion, regulatory suspensions, disruptive 澳洲幸运5官方开奖结果体彩网:corporate actions (including 澳洲幸运5官方开奖结果体彩网:reverse mergers), or other public-interest concerns." These are companies that are either scams or not actual businesses.

How to Invest in Pink Market Stocks

If you are interested in 澳洲幸运5官方开奖结果♑体彩网:ꦜinvesting in Pink market stocks you will need to find a broker. If you already have a 澳洲幸运5官方开奖结果体彩网:brokerage account, the broker may allow you to trade these types of stock♑s. There's no guarantee, though: Some brokerage firms only allow seasoned clients trading privileges in this market.

Your broker may also ask you to sign an additional form that says 𒅌you understand the risks associated with trading Pink market stocks. A lot of investors like to use a different broker with better rates—some will charge a flat fee and others will charge a different fee to trade these stocks.

The Bottom Line

The Pink market is the most speculative of the three main marketplaces for trading OTC securities. There aren't many restrictions stopping companies from trading there and that has led to many investment horror stories.

The market has come a long way over the past few years, though. With the help of the expanding OTC markets, more information and some standards have been set to help investors find out about the companies trading there. Yes, it is still a much riskier place to invest and should be avoided by most investors. However, transparency is improving and that's a great thing.