What Is the Over-the-Counter Bulletin Board (OTCBB)?
The over-the-counter bulletin board (OTCBB) is an electronic quotation service provided by the Financial Industry Regulatory Authority (FINRA) to its subscribing members for over-the-counter (OTC) trade data for U.S. stocks. Unlike other OTC platforms, OTCBB is a quotation-only service. In 2020, FINRA announced it would be winding down the OTCBB, as the bulk of OTC stock trading now occurs on OTC Markets Group's platforms.
- The over-the-counter bulletin board (OTCBB) is a regulated quotation service for over-the-counter (OTC) securities provided by the Financial Industry Regulatory Authority (FINRA).
- It offers up-to-the-minute quotes, last-sale prices, and volume information.
- In 2020, FINRA decided to wind down the OTCBB services, as the platforms provided by OTC Markets Group have taken the lion's share of U.S. OTC stock trading and data.
- All companies listed on this platform have to file current financial statements with the Securities and Exchange Commission (SEC) or another relevant federal regulator.
- Only a select few OTCBB stocks successfully moved from the OTC market to a major exchange.
Understanding the Over-the-Counter Bulletin Board (OTCBB)
The OTCBB offers traders and investors up-to-the-minute quotes, last-sale prices, and volume information for equity securities traded OTC. All companies listed on this platform have to file current financial statements with the Securities and Exchange Commission (SEC) or another relevant federal regulator.
The OTCBB was created in 1990 after the Penny Stock Reform Act of 1990 stipulated that the SEC must develop some type of electronic quotation system for stocks that could not be listed on one of the major exchanges. Stocks that traded OTC were traded between individuals and market makers using computers and telephones.
As is the case today, OTC stocks on the OTCBB are not part of any major exchanges. This is primarily because OTC stocks tend to be small and volatile, which makes meeting listing requirements difficult.
More importantly from the trading standpoint, the bid-ask spread is typically larger for these stocks as they typically trade with less frequency than exchange-listed stocks. Only a select few OTCBB stocks successfully moved from the OTC market to a major exchange.
The pink sheets are a privately held company, while FINRA provided the OTCBB service.
The Importance of the Over-the-Counter Bulletin Board (OTCBB) and OTC Markets
For those small companies that cannot meet the listing requirements to trade their securities on national exchanges, the OTCBB, and nowadays the current offerings of OTC Markets, are an important alternative.
Small companies need financing from investors to grow, even though their total market value might never rival a mid-cap stock. Investors, in turn, are attracted to the outsized returns that can still occur on the OTC market as some of these firms do find ongoing success and outsized profits.
While these companies use the OTC markets in place of one of the major exchanges, investors need to remember that the OTCBB and OTC Markets are not, in fact, actual exchanges but merely quotation services. All securities traded OTC are, in reality, traded by a web of market makers who input different quotes and trades through a secure computer network that can only be accessed by those who subscribe.
Phasing Out the Over-the-Counter Bulletin Board (OTCBB)
OTCBB still provides market information through FINRA's website, but it is now all but obsolescent. The OTCQB, in particular, effectively replaced the OTCBB as the main market for trading OTC securities that report to a U.S. regulator. As it has no minimum financial standards, the OTCQB often includes shell companies, penny stocks, and small foreign issuers.
FINRA filed a rule change in 2020 with the SEC that proposes and plans to cease the operations of the OTCBB altogether shortly.
OTCBB vs. Pink Sheets
The OTCBB and pink sheets are both quotation services for stocks that trade OTC. The OTCBB is operated by FINRA, while the pink sheets is operated by a private company. The listing standards are generally laxer for the pink sheets. That is, some pink sheet stocks might not be eligible for listing on the OTCBB.
Stocks listed on the OTCBB are usually registered with the SEC (except for those not legally required to do so). Meanwhile, stocks on the pink sheets may not file regular reports and might not be listed with the SEC. Beyond the OTCBB and pink sheets, there are other quotation services. It’s also possible to buy stocks not listed on either directly from a broker.
The lack of filing requirements for pink sheets stocks makes them inherently riskier.
How to Get Listed on the OTCBB
Companies are not listed on the OTCBB but quoted on the board. The only stipulation for the OTCBB is that a company trading over-the-counter (OTC) must not be delinquent in its Securities and Exchange (SEC) filings.
How to Trade in OTCBB Penny Stocks
Penny stocks don’t trade on the OTCBB. Penny stocks trade for less than $1 per share but they trade through a brokerage. The OTCBB can help track prices for penny stocks but does not facilitate penny stock trading.
Which App Allows You to Trade on the OTCBB?
No app allows you to trade on the OTCBB. The OTCBB is a price-quoting service. Meanwhile, investors can trade stocks via brokerage apps that have their prices quoted on the OTCBB.
Are OTC Stocks Publicly Traded?
OTC stocks are traded without a broker or central exchange as they are generally too small to be listed on a formal exchange. Some OTC stocks are considered publicly traded, though some companies on the OTC market are private companies.
What Trades on OTCBB?
Securities that are listed on the OTCBB include those that trade on the OTC market, such as stocks, warrants, units, and ADRs.
Is It Safe to Buy OTC Stocks?
There are two key risks to trading OTC stocks: the first is the poor liquidity, as they are thinly traded; and the second is the lack of reliable information available about the company.
Can I Buy OTC Stocks on RobinHood?
OTC stocks are not available on RobinHood, although the trading app does allow the trading of certain penny stocks.