Wondering what OTC Markets, OTC 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 in Canada and the risks involved with trading these types of stocks. Here’s our guide on how to buy OTC stocks in Canada.
What are OTC stocks?
OTC (“over-the-counter”) stocks are traded by broker-dealers off of 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.
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 for several reasons:
- A businesses has decided to go private.
- A business has chosen to delist certain classes of its stock, in which case, those stocks could end up being traded over the counter.
- In rare cases, a business has been forced off an exchange for failing to adhere to rules set by stock exchange regulators or the US Securities and Exchange Commission (SEC).
OTC stocks are usually considered high-risk. You can buy cheap stocks, which end up rising in value significantly. But many of these companies are in volatile positions, so the odds of profiting can be slim. However, there are lots of companies that choose to trade over the counter to keep costs down.
What are OTC Markets?
OTC stocks are listed in 1 of 3 OTC markets owned and managed by the OTC Markets Group.
|Name of market||Description|
|OTCQX (The Best Market)||The qualifications to list on this market are stricter than for either of the other markets. Many of stocks are for blue-chip companies in Canada, Europe, Brazil and Russia. Penny stocks cannot trade on this platform.|
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 Corp. (LBRDB), Solaris Resources Inc. (SLSSF) and Freddie Mac (FMCC).
|OTC Pink (The Open Market)||Stocks that don’t qualify for the OTCQX or OTCQB are listed on OTC Pink by default. Companies don’t have to disclose information to be listed, which is why 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.
What are pink sheets?
Pink sheets refer to stocks listed on OTC markets. Formerly known as the National Quotation Bureau (NQB), OTC Markets listed the prices of stocks and bonds on pink and yellow papers. The NQB was renamed Pink Sheets LLC in 2000 and again to OTC Markets Group in 2011.
OTC stocks list
There are more than 12,000 stocks on OTC Markets. Some choose this avenue 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)
- Enbridge Inc. (EBBNF)
- Alimentation Couche-Tard Inc. (ANCUF)
- Volkswagen AG (VWAGY)
- Canadian Imperial Bank of Commerce (CCIXF)—CIBC
How to buy OTC stocks in Canada
- 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.
- Fund your account. Your broker can walk you through this. Make sure you have enough to cover the position you want to open.
- Research, research, research. You need to make sure you do plenty of research into the stocks you want to invest in.
- Find the stock on your chosen platform. Just type in its ticker symbol or company name (for example: VWAGY for Volkswagen).
- Buy your over-the-counter stock.
OTC Trading Platforms
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.
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 in Canada
OTC 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 OTC stocks and penny stocks are frequently traded and are thus considered to be “thinly traded stocks,” it can be difficult to make a profit.
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 set out by stock exchange regulators or SEC as traditionally-listed stocks are. This makes 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 risks before moving forward. To learn more about online stock trading, check out our detailed guide.
Frequently asked questions on OTC markets in Canada
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, 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 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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