# Pink Market: Listings for Stocks That Trade Over-the-Counter

"Pink sheets" is an outdated term for stocks that trade [over-the-counter](https://www.investopedia.com/terms/o/otc.asp) (OTC) rather than on a public stock exchange in the U.S. These companies either cannot meet the requirements for listing on an exchange like the New York Stock Exchange (NYSE) or prefer to trade over the counter.

Some pink sheet companies are too small to qualify for an exchange while others prefer to avoid the costs and complications of the required filings with the [Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC). Some foreign companies list on their home exchanges but opt to sell OTC in the U.S.

Most pink sheet stocks are highly speculative, although their notorious lack of regulation has been corrected to some extent in recent years. They also go by different names. Pink sheets were officially renamed Pink OTC Markets in 2008 and then OTC Markets Group in 2011. The colloquial term is still widely used and is still referenced in one of the three OTC markets, which is called the Pink market.  

### Key Takeaways

*   Pink sheet stocks, or OTC stocks, are not listed on major U.S. stock exchanges and are generally considered risky in comparison with listed stocks.
*   OTC Markets has three main marketplaces for trading OTC stocks: OTCQX, OTCQB, and the Pink market.
*   The Pink market is the most speculative and loosely regulated, although the rules have tightened in recent years.

![Pink Sheets](https://www.investopedia.com/thmb/5AIpUEnDCgg3QhUtWSAadMpjR7M=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/pinksheets.asp-final-f3c4547adc2847ceacc3e9fda658a440.png)

*— Investopedia / Ryan Oakley*

## Understanding the Pink Open Market

The pink market got its name from the color of the paper on which quotes of share prices were originally published. Today's trades are electronic, but OTC stocks to this day are often referred to as pink.

The OTC market is a decentralized market where securities not listed on major exchanges are traded directly by a network of [dealers](https://www.investopedia.com/terms/d/dealer.asp), who carry inventories of securities to facilitate orders. OTC securities generally trade on [alternative trading systems](https://www.investopedia.com/terms/a/alternative-trading-system.asp) (ATSs), although many are also available through online brokerages.

There are two interdealer quotation systems for trading OTC securities: Global OTC ATS, which is part of the NYSE Group, and OTC Link ATS, which is operated by OTC Markets.

OTC Market Group has three regulated main marketplaces for trading OTC stocks: [OTCQX](https://www.investopedia.com/terms/o/otcqx.asp), [OTCQB](https://www.investopedia.com/terms/o/otcqb.asp), and the Pink market. Each of these markets has varying levels of financial standards and regulatory oversight. 

The Pink market is considered the most speculative and loosely regulated tier for trading OTC stocks. It is an open market with very little in the way of financial standards.

Depending on the quantity and promptness of information they share with investors, these companies can be further divided into categories, such as current or limited.

> **Fast Fact**
>
> There used to be another OTC exchange called the OTC Bulletin Board (OTCBB), but it closed in 2021.

## The Pink Market vs. OTCQX vs. OTCQB vs. Expert

Unlisted securities either qualify for OTC Market's OTCQX or OTCQB or by default trade on Pink. The OTCQX has the most stringent requirements, followed by the OTCQB, the Pink Open Market, and then finally the Expert Market.

Companies in the Expert Market provide the lowest level of disclosure, with trading in this market, as a result, limited to quotation on an unsolicited basis.

Companies generally don't need to jump over many hurdles to get into the Pink market. This market is made up of all sorts of companies, including foreign ones, penny stocks, and some shell companies.  
  
Because they face very few listing requirements, Pink market constituents can be very risky to invest in. Securities in this category are not required to register with the SEC and therefore are not required to disclose their full financial details. That makes it harder for investors to determine which companies are legit and which aren't.

> **Important**
>
> Companies in the Pink market are now required to disclose their financials.

## Pink Market Regulation

The terminology around pink sheets and OTC stock trading has changed along with regulations. This part of the market has attracted a lot of controversy over the years, leading to calls for greater transparency.

A few requirements have steadily been introduced. One change removed so-called "dark securities", which did not publish the prices of buy and sell orders. Another restricted broker-dealers and other market makers from publishing quotations for OTC stocks that do not provide publically available information about their financials. That was part of an amendment made to Rule 15c2-11.

Companies can create their own disclosure documents or fill out a form. Once completed and verified, they must post the information on the OTC Markets website.

Financial statements, while not required to be audited, must be prepared according to U.S. [GAAP](https://www.investopedia.com/terms/g/gaap.asp) or International Financial Reporting Standards ([IFRS](https://www.investopedia.com/terms/i/ifrs.asp)).  

For most domestic companies, the following information must be published:

*   Most recent annual report with two-year comparative financial statements and any subsequent quarterly reports.
*   A disclosure statement.
*   An attorney letter that follows the guidelines for unaudited companies.

Requirements for international companies and banks vary slightly.  

## Pink Market Tiers: Current and Limited

There are tiers within the Pink market. Companies that fully abide by the disclosure rules are dubbed "current," whereas those who do the bare minimum under Rule 15c2-11 and are perhaps late with filings are downgraded to the “Pink Limited” market tier.

Pink Limited is essentially a demotion from the Pink current status for those who don't fully abide by Rule 15c2-11. That demotion can lead to restrictions and is generally less favorable.

When a company no longer meets the requirements for limited information, it will be moved to the Expert Market, where there are no public broker-dealer quotations.  

## Pros and Cons of the Pink Market

Pink market listings offer small companies a chance to raise capital through the sale of shares to the public and make it easy for an investor to take a stake in the market, as transaction costs are often low.

However, these securities are prone to fraud and price manipulation due to the lack of required financial disclosure. Shares often trade infrequently, making it hard to buy or sell when the investor wants.

Pros

*   Pink market listings provide small companies access to capital funding.
    
*   Low share prices leave room for fast gains if the company succeeds.
    
*   Transaction costs are lower since companies do not pay expensive exchange listing fees.
    

Cons

*   Fewer regulations and requirements can lead to outdated or incorrect information given to the investor. 
    
*   Pink market stocks trade thinly making it hard for an investor to buy or sell shares at will.
    
*   Pink market listings are prone to fraud.
    

## Examples of Pink Stocks

OTC Markets Group lists the most actively traded companies on the Pink market. As of mid-June 2024 they include:  

*   Greyscale Ethereum Trust (ETHE), a fund based on the price of Ethereum cryptocurrency  
    
*   Roche Holding Ltd (RHHBY), the Swiss pharmaceutical company
*   Nestle S.A. (NSRGY), the Swiss food conglomerate
*   Tencent Holding Ltd (TCEHY), the Chinese technology company

> **Fast Fact**
>
> Some very reputable international companies trade on the Pink market. They list on their home country exchanges but may find the duplication of regulatory paperwork for a U.S. exchange too onerous.

## What Is OTC Link?

Broker-dealers who buy and sell OTC securities use OTC Link ATS to publish their bid and ask prices.

OTC Link LLC is owned by OTC Markets Group Inc., which operates OTC Link ATS, an alternative trading system (ATS) and electronic inter-dealer quotation system that displays quotes from broker-dealers for many over-the-counter (OTC) securities.

## Where Can I Find Information on OTC Bitcoin Investing?

The [SEC provides information](https://www.sec.gov/securities-topics/ICO) on OTC offerings. It also states that digital assets and technology bring an increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets.

## What Was One of the Most Successful Penny Stock Offerings?

True Religion Jeans traded under a dollar per share in the early to mid-2000s and in 2013 the company was acquired by Towerbrook Capital Partners for $32 per share, netting investors a 5,000% increase.

## The Bottom Line

For many years, people used the term "Pink market" to refer to any over-the-counter (OTC) security, meaning any investment not listed and traded on a major U.S. stock exchange. These days there is more transparency about most OTC offerings.

OTC Markets Group offers a range of markets for trading OTC securities, each with its own level of financial standards and regulatory oversight. The Pink market is the one with the fewest requirements, making it fairly easy for companies to get into and risky for investors.

That said, there are legitimate companies in this market, including some of the world’s biggest foreign companies. Moreover, disclosure requirements are becoming more stringent, which has helped to boost transparency and weed out some of the shadier operators.

> **Article Sources**
>
> 1.  OTC Markets. "[Pink Sheets LLC Announces Name Change to Pink OTC Markets Inc](https://www.otcmarkets.com/stock/OTCM/news/Pink-Sheets-LLC-Announces-Name-Change-to-Pink-OTC-Markets-Inc?id=16383)."
>     
> 2.  OTC Markets. "[2010 Annual Report -- Issuer's Equity Securities: Common Stock](https://www.otcmarkets.com/ajax/showFinancialReportById.pdf?id=47000)," Page 3.
>     
> 3.  OTC Markets. "[About](https://www.otcmarkets.com/about/our-company)."
>     
> 4.  The U.S. Securities and Exchange Commission. "[Over-The-Counter (OTC) Securities](https://www.investor.gov/introduction-investing/investing-basics/glossary/over-counter-otc-securities)."
>     
> 5.  OTC Markets. "[15c2-11 Resource Center](https://www.otcmarkets.com/learn/15c2-11-resource-center)."
>     
> 6.  Financial Industry Regulatory Authority. "[FINRA Announces Closure of the OTC Bulletin Board](https://www.finra.org/rules-guidance/notices/21-38)."
>     
> 7.  OTC Markets. "[Alternative Reporting Standard: Pink Disclosure Guidelines](https://www.otcmarkets.com/financialReportViewer?symbol=SDRC&id=229396)."
>     
> 8.  OTC Markets. "[An Investor’s Guide: Common Issues With Company Disclosure](https://blog.otcmarkets.com/2021/12/15/an-investors-guide-common-issues-with-company-disclosure/)."
>     
> 9.  OTC Markets. "[Pink Current and Limited Information Disclosure Requirements](https://www.otcmarkets.com/corporate-services/information-for-pink-companies/pink-current-and-limited-information-disclosure-guidelines)."
>     
> 10.  OTC Markets. "[OTC Markets: Rule 15c2-11 Amendments FAQs](https://blog.otcmarkets.com/2021/07/16/otc-markets-rule-15c2-11-amendments-faqs/)."
>      
> 11.  OTC Market. "[Current Market](https://www.otcmarkets.com/market-activity/current-market)."
>      
> 12.  U.S. Securities and Exchange Commission. "[OTC Link LLC](https://www.sec.gov/fast-answers/answerspinkhtm.html)."
>      
> 13.  Timothy Sykes. "[The 10 Most Successful Penny Stocks In History](https://www.timothysykes.com/blog/most-successful-penny-stocks-in-history/)."