OTC Markets, OTC stocks, “pinks sheet” listings — over the counter instruments can go by many names. We walk through the Canadian trading platforms provide access to OTC exchanges, how to buy OTC stocks in Canada and the risks involved with trading them.
What are OTC stocks?
OTC (“over-the-counter”) stocks don’t trade on centralized exchanges like the NYSE and TSX. Instead, these stocks trade through networks run by broker-dealers. These stocks are usually cheaper and less regulated than securities that trade on centralized exchanges.
Why do stocks trade OTC?
Many OTC stocks are companies that are just getting off the ground. They may not meet volume requirements of traditional markets, or the company is looking to save money by listing OTC.
Other stocks are listed in OTC Markets because companies have been delisted from major exchanges, for example:
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).
How to buy OTC stocks in Canada
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. Make sure you have enough funds to cover your trade. 3. Do your 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: ADDDF for adidas AG.). 5. Buy your over-the-counter stock.
OTC Trading Platforms
You can trade OTC stocks through the platforms below. Be aware that certain platforms may restrict OTC Markets transactions. For example, 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.
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What is an OTC Market?
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 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 market 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 sheet stocks?
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 stock list
There are more than 12,000 stocks on OTC Markets, which you can view and filter using the stock screening tool on the OTC Markets website.
Some companies choose this avenue to avoid filing with the SEC, while others may have been delisted from other exchanges. Others, like Samsung Electronics (OTC:SSNL.F) are massive, billion-dollar-market-cap companies that trade on OTC Markets and foreign exchanges.
Many stocks trade over-the-counter because the company is still to small or infrequently traded to meet the volume thresholds of larger exchanges. For instance, before Walmart became the conglomerate it is today, it traded OTC.
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
Samsung Electronics (SSNL.F)
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 can be more risky than stocks trading on larger exchanges. Some OTC stocks are highly speculative and therefore come with inherent risk, while others may lack the legitimacy needed to trade on a traditional exchange. If you want to take on some more risk and expose yourself to OTC markets, make sure that you research the company thoroughly, and treat lack of information as a red flag.
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 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
OTC Markets hours are between Monday and Friday from 9:30am to 4:00 pm (Eastern Daylight Time).
Yes. OTC Markets is based in the US, so you'll need a Canada-based trading platform that provides access to US stocks. However, not all platforms allow OTC Markets trades. Check with your platform to find out for sure. See the table above to compare Canadian brokerages that provide access to OTC Markets.
No. Securities that trade on OTC markets cannot be held or traded in a TFSA or RRSP.
Yes. Publicly traded companies can have multiple listings for different classes of stock (i.e. common, preferred, Class A, Class B etc.). A business may choose to delist one of its classes of stock from a major exchange and list it instead on OTC Markets.
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.
Stacie Hurst is an editor at Finder, specializing in a wide range of topics including stock trading, money transfers, loans, banking products, online shopping and streaming. She has a Bachelor of Arts in Psychology and Writing, and she completed one year of law school in the United States before deciding to pursue a career in the publishing industry. When not working, Stacie can usually be found watching K-dramas or playing games with her friends and family.
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