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How to trade OTC stocks

Find out how to trade over-the-counter stocks through OTC Markets.

Buy and Sell OTC Stocks Compare Brokers

Wondering what OTC Markets, over-the-counter stocks or “pinks sheet” listings are? We walk through what you need to know including what “OTC” means, which Canadian trading platforms provide access to OTC stocks and the risks involved with trading these types of stocks.

What are OTC stocks?

OTC (“over-the-counter”) stocks are traded by broker-dealers off major, centralized exchanges like the NASDAQ, NYSE and the TSX. Broker-dealers are individuals or investment firms that trade stocks for their own portfolios or the portfolios of their clients. OTC stocks trade on 1 of 3 markets managed by the OTC Markets Group (see below).

Many OTC stocks are penny stocks in companies that are just getting off the ground. As the name suggests, these stocks cost just pennies or several dollars to buy.

Other stocks are listed in OTC Markets because companies have been delisted from major exchanges. This could be because businesses have decided to go private or, in rare cases, have been forced off exchanges for failing to adhere to rules set by stock exchange regulators or the US Securities and Exchange Commission (SEC).

Even if a company isn’t entirely delisted, it could still choose to delist certain classes of its stock. In which case, those stocks could end up being traded over the counter.

OTC stocks are usually considered high-risk. On one hand, you can buy dirt cheap stocks and see your holdings rise in value significantly. On the other hand, many of these companies are in volatile positions, so the odds of profiting can be slim. That being said, there are lots of companies that choose to trade over the counter—usually to keep costs down—but the stocks on offer aren’t penny stocks.

What is OTC Markets?

OTC stocks are listed in 1 of 3 markets owned and managed by the OTC Markets Group, which facilitates more than $400 billion worth of trades annually.

  • OTCQX. This is the highest level on which OTC stocks can trade. The standard for qualifying to trade on the OTCQX platform is more strict than for either of the other 2 platforms. Many stocks listed on the OTCQX are for blue-chip companies in Canada, Europe, Brazil and Russia. Examples include Heineken N.V. (HINKF), Deutsche Telekom AG (DTEGF) and adidas AG (ADDDF).
  • OTCQB (The Venture Market). This is the mid-tier platform on which OTC stocks can trade. Most of the stocks listed on this platform are for young and growing companies in the US and other countries. Examples include Liberty Broadband Corporation (LBRDB), Canada Nickel Company Inc. (CNIKF) and Federal Home Loan Mortgage Corporation (FMCC) “Freddie Mac.”
  • OTC Pink. This is the bottom platform on which OTC stocks trade. Out of the 3 platforms, OTC Pink has the lowest qualification requirements. Stocks that don’t qualify for the OTCQX or OTCQB are by default listed on this market. Companies do not have to disclose any information on OTC Pink stocks. As such, these stocks are considered the most risky.

The system OTC Markets uses to facilitate trades is called OTC Link, which is regulated by the US SEC. OTC Link is registered as a broker-dealer and an Alternative Trading System and is also a member of the Financial Industry Regulatory Authority (FINRA) in the US.

Where did OTC Markets and “pink sheets” come from?

Formerly known as the National Quotation Bureau (NQB), OTC Markets was created in 1913 and is headquartered in New York City. The NQB listed the prices of stocks and bonds on pink and yellow papers. This is how the term “pink sheets” came to be used to refer to stocks listed on over-the-counter markets.

The NQB was renamed Pink Sheets LLC in 2000 and again to OTC Markets Group in 2011.

Examples of OTC stocks

There are more than 12,000 stocks on OTC Markets. Some are on it to avoid filing with the SEC, while others may have been delisted from other exchanges. Some companies with stocks listed on OTC Markets include:

  • Grayscale Ethereum Trust (ETHE)
  • Nestlé S.A. (NSRGY)
  • Nissan Motor Co., Ltd. (NSANY)
  • Toronto-Dominion Bank (TORDF)
  • Enbridge Inc. (EBBNF)
  • Alimentation Couche-Tard Inc. (ANCUF)
  • Volkswagen AG (VWAGY)
  • Canadian Imperial Bank of Commerce (CCIXF)—CIBC

How to buy OTC stocks

  1. Get a broker. Not all brokers let you buy stocks on OTC Markets, so you need to check with your chosen broker. From the ones we’ve reviewed on our site, Questrade, Qtrade and Interactive Brokers let you trade OTC stocks.
  2. Fund your account. Your broker can walk you through this. Make sure you have enough to cover the position you want to open.
  3. Research, research, research. You need to make sure you do plenty of research into the stocks you want to invest in.
  4. Find the stock on your chosen platform. Just type in its ticker symbol or company name (for example: VWAGY for Volkswagen).
  5. Buy your over-the-counter stock. You’re good to go!

Which Canadian stock trading platforms let you trade OTC stocks?

While some Canadian stock trading platforms, like Wealthsimple, don’t provide access to OTC Markets stocks, many do. You can trade OTC stocks through the platforms below.

Be aware that certain platforms may restrict OTC Markets transactions. For example, as of the time of writing, CIBC Investor’s Edge only allows OTC Market trades to be executed with a live representative; you can’t initiate a trade yourself through an online account. Additionally, CIBC doesn’t allow OTC stock trading through registered accounts like RRSPs and TFSAs. So, if you want to trade OTC stocks with CIBC Investor’s Edge, you’ll have to open a non-registered investment account.

Name Product Available Asset Types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
Scotia iTRADE
Bonds, Options, Mutual Funds, ETFs, GICs, International Equities
$4.99-$9.99
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$0
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
OFFER
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Get up to 50 free trades. Be one of the first 100 new Qtrade clients to use the promo code 50FREETRADES and deposit a minimum of $10,000 (or top up to $15,000 to get $150 transfer fees waived). Valid until September 30, 2021.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
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OTC stocks vs. penny stocks

These terms are sometimes used interchangeably, but there’s a key difference. OTC stocks are stocks that are listed on one of the markets owned by the OTC Markets Group. Penny stocks refers to stocks that are priced particularly low, usually under USD $5.

Some penny stocks trade on well known stock exchanges such as NASDAQ or TSX. OTC stocks may be cheaper but don’t necessarily count as penny stocks.

The risks of trading OTC stocks

OTC stocks and penny stocks are more risky than traditional stocks. There aren’t as many regulations or requirements governing these stocks, and it can be difficult to research on your own as companies don’t need to release as much financial information as would be required for stocks listed on a major exchange.

As these stocks are frequently traded and are thus considered to be “thinly traded stocks,” it can be difficult to make a profit.

Bottom line

Over-the-counter stocks can be a great opportunity for investors, but it’s also risky. Companies aren’t held to the same reporting standards for OTC stocks as for traditionally-listed stocks, making it harder to research and discover which stocks are actually good investments. Double check that your trading platform lets you trade OTC stocks, and make sure you know the fees involved before moving forward.

To learn more about online stock trading, check out our detailed guide.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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