Over the Counter traded stocks are traditionally quoted in the Pink Sheets and OTCBB, and these stocks are often called penny stocks as the prices of these shares are often initially priced at 0.01 US dollar, or 1 cent a penny hence the name penny stocks. Nowadays, stocks trading at generally under 5 US dollar a share, and whose companies have market caps of under 500 million US dollars.



A little bit of history for you. Starting in 1913, a U.S.-based company called the National Quotation Bureau began reporting stock quotations printing stock quotations on pink sheets of paper. These pink sheet quotations included penny stocks. The National Quotation Bureau, over time, evolved into the Pink Markets OTC, Inc., which lists penny stocks at its www.pinksheets.com website.

The Pink Sheets/Pink Markets OTC Inc. is not a stock exchange, but a private company that publishes penny stock quotes via its electronic quotation system. The Pink Sheets electronic quotation system is used by market makers and brokers to publish their bid and ask quotation prices. At the Pink Sheets website, you can find all sorts of penny stocks.

The companies whose penny stocks are listed on the Pink Sheets do not need to fulfill any requirements, unlike companies that are listed at regulated stock exchanges. Companies whose stocks are listed and traded in stock exchanges need to fulfill certain requirements such as audited financial statements filed with the stock exchange and filed with the Securities and Exchange Commission.

Stock exchanges also have minimum listing requirements, such as number of publicly traded shares, total market value, share price, and number of shareholders. Generally, penny stocks do not meet such requirements, specially the minimum stock prices of stock exchanges and audited financial statements, and that is why penny stocks are quoted in the Pink Sheets.

While companies quoted on the Pink Sheets are not required to fulfill any requirements, these same penny stock companies are also often listed and quoted in the Over The Counter Bulletin Board, commonly known as the OTCBB. The OTCBB (www.otcbb.com) is another electronic quotation system much like the Pink Sheets, but overseen by the U.S. Financial Industry Regulatory Authority (FINRA), Unlike the Pink Sheets, the OTCBB requires that the companies listed in its quotes be current in their Securities and Exchanges Commissions filings. Other than compiling with SEC filing, the OTCBB does not require companies to have minimum market capitalization, corporate governance, minimum price, or other requirements.

Penny stock companies are often quoted in the Pink Sheets and the OTCBB simultaneously, and being listed in the latter means that at least the company issuing the penny stock has complied with the SEC filing requirements. That means you are a little bit safer dealing with penny stocks that are found on the OTCBB (or both the OTCBB and the Pink Sheets), rather than those found at the Pink Sheets alone.