The OTC Bulletin Board or Over the Counter Bulletin Board is an advanced technological and electronic system in United States for Stock Market offered by the NASD or the National Association of Securities Dealers. It is used for finding out the exact quotes of the shares, prices at which they were previously sold, and a total amounts is shares floating in the market of the specific company, of the companies that are not listed on the NASDAQ stock exchange or national securities otcbb STOCK EXCHANGE.
OTCBB requires its companies to follow certain rules and regulations. This includes organizing files of latest financial statements all the time. How ever, requirements, which are required by New York Stock exchange or Nasdaq need not to be complied in order to start trade on OTCBB. Companies which do not fulfill the requirements by SEC like meeting minimum capitalization, minimum share price or other requirements are delisted from Stock exchange and there shares are then quoted on the OTCBB. These companies are quoted on Pink sheets also.
In OTC market, stocks are usually not traded much because of the high risk factor involved in it. These stocks are called as microcap and penny stocks. These are the stocks of the companies which have a market capitalization of US $ 300million and less. The shares' prices get manipulated easily and there exists a high risk of fraud so investors try to avert it.
Stocks were traded traditionally on OTC by buying them directly or through the telephone. However, since the evolution of the internet majority of the stocks are traded via the internet thus bringing a new turn to OTC trading. This system is known as Trading Software Platform.
The procedure for stock trading involves a simple routine. A stock trading access is required to the OTCBB market which is provided by the broker. This access authorizes the trader to trade (ie to buy and sell) OTC stocks based on real time, which are then compared to an online stock market trader. In OTC trading, there is large distance between ask and bid prices. Numerous advantages are involved by following the method of OTCBB making the conventional method outdated and obsolete.
Online OTC trading of stocks is very advantageous for the trader. Firstly, its way too time saver. Secondly, it doesn't require much effort since all the date of whatever is happening in a stock market can be seen on a single screen. It provides real time access to the stocks. Even the investor can trade stocks on its own without taking the services of any stockbroker. Buying and selling is done in a speedy manner. Major OTCBB markets like DOMS, Finance 500, SBSH, Citi group can be accessed directly.
With OTCBB online the investor gets the capability of dealing into commodities, stock markets, futures, trade options using a single account. Such advantages and convenience make this system very appealing to the investors who want to opt stock markets as their full time business. Due to these advantages and real time access to the stocks' knowledge, most brokers have opted for this OTCBB system.