OTC markets, or over-the-counter markets

Over-the-counter markets, or OTC, refers to the markets that list more than 12,000 securities, which can include stocks, ETFs (exchange traded funds), ADRs (American Depository Receipts), bonds, commodities, cryptocurrency, penny stocks, or derivatives. OTC markets are decentralised, as opposed to centralised exchanges like the NYSE and Nasdaq, but most still meet SEC regulations. Companies may choose to list on an OTC market if they don’t meet the requirements of other exchanges - such as trading volumes, shareholder numbers, or reporting requirements - or when they can’t meet the listing fees - which in June 2024 sat around US$250,000 to list on the NYSE, and up to US$173,500 on the Nasdaq. The OTC markets are electronic only, and trades occur directly between two parties, typically with no intermediaries (such as brokerages or brokers), but many still use stock tickers like traditional exchanges. OTC Markets Group (OTCM) operates a public market for some over-the-counter securities - some that go on to list on the NYSE and Nasdaq. Three main OTC exchanges include:

• Best Market (OTCQX): Credible companies that meet high financial and reporting standards
• Venture Market (OTCQB): Younger companies in growth mode that meet lenient financial guidelines‍
• Pink Sheets: Considered the riskiest of all, this OTC market is known for trading volatile penny stocks that were made famous by The Wolf of Wall Street. This market is prone to fraud, shell companies and a lack of financial or company transparency.