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<\/span>Main types of OTC<\/span><\/h2>\n\n\n\n
More and more stocks appear on the OTC market every day. Trades are carried out automatically via the telecom system. A serious drawback here is the possibility of stock market manipulation with multiple fraud schemes. It is said that SEC, the regulating organisation on securities and exchanges, has a negative attitude towards the OTC market. For the investor to be able to better evaluate the transparency of the company and its potential of growth, there is a system of categories that helps assess the risks.<\/p>\n\n\n\n
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Best Market<\/strong> (OTCQX<\/strong>) is the most prestigious category. The stock price<\/a> in OTCQX is never below 5 USD. A price below this threshold is thought to possibly reveal a fraud company or one on the verge of bankruptcy.<\/li>\n\n\n\n
Venture Market<\/strong> (OTCQB<\/strong>) - to comply with this category, the company has to give a full account of its finances to SEC. If the requirements of the regulator are fulfilled, the company remains in the category. However, as soon as it breaks them, it is transferred to the Pink Open Market.<\/li>\n\n\n\n
The Pink Open Market<\/strong> features a whole range of companies that do not comply with the requirements of SEC. Their stocks can be bought very cheaply, but the risk of fraud is high.<\/li>\n<\/ol>\n\n\n\n
<\/span>The peculiarities of trading OTC stocks<\/span><\/h2>\n\n\n\n
$\"The$ <\/figure>\n\n\n\n
OTC trading is an alternative for small companies. The process of entering a regulated exchange may be laborious and complicated for the company, while placement on the OTC allows attracting capital quickly. The requirements of OTC platforms differ significantly, and it can sometimes be very difficult for an investor to find financial information about the company. While the volume of trading is lower here, the stocks are traded much cheaper than their real value, and this is how you can make profit.<\/p>\n\n\n\n
Remember that OTC stocks have less liquidity due to their low demand. This means that trading OTC stocks may be happening with lags, and the difference between the buying and selling price may change significantly due to the market situation. There are high probabilities of fraud because the company does not report on its financial accounts. On the other hand, there might be maximally volatile movements at the moments of publication of certain economic data.<\/p>\n\n\n\n
<\/span>Summary<\/span><\/h2>\n\n\n\n
Most regulated securities with a good growth potential and accurate financial records cost over 15 USD per stock. As a rule, such stocks are traded on NYSE or NASDAQ. OTC stocks are traded below 1 USD per stock, and most of the financial accounts of such companies are unavailable – therefore, buying such assets is always risky.<\/p>\n\n\n\n
Nevertheless, if you only have a small amount on your deposit account, you may risk and invest. Not every private investor can purchase 100 Apple<\/a> stocks at the price of 275 USD per stock, but they can always afford buying 1000 OTC stocks costing 0.1 USD, which, in the end, may bring larger revenue than pricy stocks of leading companies.<\/p>\n\n\n\n