Page 180

requirements for stocks quoted on OTCBB. It should be noted that OTC stocks carry a higher risk than those traded in stock exchanges.

Pink Sheet Stocks

Pink sheets is another quotation service for the OTC stocks which competes with the OTCBB. Pink sheet stocks are traditionally very low-priced and low-volume over the counter stocks which are no longer listed daily with the rest of the OTC stocks. Instead the stock quotes are provided literally on “pink” sheets. At least they used to be. These days trading these stocks is facilitated electronically on a system known as Electronic Quotation Service (EQS), operated by the National Quotation Bureau (NQB). Just like the OTCBB, EQS is not a stock market, but is a quotation system where market makers post their bid and ask prices for the OTC stocks to create a more cohesive, competitive, and liquid trading of the pink sheet issues. As such, the EQS is sometimes referred to as electronic pink sheets.

Most of the pink sheet stocks (if not all) are penny stocks, and pretty much all of them are considered high risk. They are usually very low priced (literally pennies), with low volumes and high relative bid/ask spreads. If you hear that a certain company’s stock is going on pink sheets, this usually means that the company’s fate is questionable.

The fact that a stock is trading in a stock exchange or over the counter is no issue when it comes to trading it. Your broker should be able to handle your trades transparently regardless of where the stock is traded or what system it is quoted on. But it should be noted that stocks trading in stock exchanges usually have much lower spreads and are a lot more liquid (due to consistently higher volumes) than their OTC counterparts. …