In order to educate yourself on the different terms and practices related to Pink Sheets, read along as we try to answer the common FAQs about them. What are the Pink Sheets? The Pink Sheets is an electronic quotation service which displays quotes for over the counter (OTC) securities in real time. It is not a registered stock exchange company, and it is not affiliated with the NYSE or NASDAQ. What are the different stocks being traded in Pink Sheets? The different stocks being offered in Pink Sheets are penny stocks and other over the counter (OTC) securities. Penny stocks have share prices pegged at less than $5. What is the difference between OTCBB and Pink Sheets? The Pink Sheets is not governed by NASDAQ or other SEC regulated stock exchange companies. Companies who want to trade in Pink Sheets are not required to submit financial papers. On the other hand, OTCBB or Over the Counter Bulletin Board is governed by NASDAQ, which means that the companies that want to enter OTCBB should be able to complete the requirements as required by NASDAQ. Pink Sheets also offer tickers and an electronic trade negotiating system to market makers, which OTCBB is not offering. How can a company get quoted in Pink Sheets? If your company wants to get quoted in Pink Sheets, you must first find a market maker who will quote the stock prices for you. Market makers are also known as broker-dealers. Your market maker should be registered with the Securities and Exchange Commission (SEC) and he should also be a member of the National Association of Securities Dealers (NASD). What different kinds of companies are quoted in Pink Sheets? There are many companies listed in Pink Sheets, but the majority of them are: Small start up companies that have not yet grown enough to meet the requirements of NASDAQ or SEC to be publicly listed. Large foreign companies that are publicly listed in their home countries, but do not pass the requirements of being listed in the US. The most common reason for this is that the financial statements of these foreign companies are not in conformity with the GAAP, which is required to be listed in the US. Companies that volunteered to be delisted and try their hand at over the counter (OTC) stocks trading. Banks and companies which are thinly traded. How do pink sheets work? If you are an investor who wants to trade on pink sheets, you must contact a brokerage firm to act as the agent between you and the market maker in pink sheets. The stockbroker will get quotes from the electronic data market system and will enter the details online. The order will then be sent to the trader, either by computer or telephone. If the trader is also the market maker for the specific stock ordered, then he will execute the order. If he is not the direct market maker, he will forward it to the market maker who is offering the best price for the security in subject, who will in turn execute the order. After this process, a transaction report will be sent to the stockbroker, which he will relay to the investor through a transaction confirmation.
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