# OTCQB Venture Market: Key Facts and Benefits for Stock Investors

## What Is the OTCQB?

The OTCQB is the middle tier of the OTC Markets Group. It is designed for early-stage and developing companies. Established in 2010, it sits between the OTCQX and the lower Pink Sheets. Unlike major exchanges, it has no minimum financial standards, so it includes a broad range of companies, including shell companies and foreign issuers. Trading happens through OTC Link rather than on major exchanges like the [New York Stock Exchange (NYSE)](https://www.investopedia.com/terms/n/nyse.asp). To be listed on the OTCQB, companies must meet basic reporting and shareholder requirements.

### Key Takeaways

*   The OTCQB is the mid-tier OTC equity market, mainly for early-stage and developing companies in the U.S. and internationally.  
    
*   Companies listed on OTCQB must adhere to minimum reporting standards, pass a bid test, and undergo annual verification.  
    
*   The OTCQB operates through OTC Link, facilitating trades via an electronic network of dealers.  
    
*   While OTCQB stocks carry protections, they are often speculative and require due diligence before investing.

## How the OTCQB Market Operates

The over-the-counter or 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). Unlike the NYSE, these dealers carry securities inventories to facilitate buy and sell orders.

The OTC Market Group's OTC Link runs the OTCQB marketplace, an inter-dealer quotation and trading system. OTC Link is registered with the [Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp) as a broker-dealer and also as an [alternative trading system (ATS)](https://www.investopedia.com/terms/a/alternative-trading-system.asp).

OTC Link allows [broker-dealers](https://www.investopedia.com/terms/b/broker-dealer.asp) to post quotes and negotiate trades using its electronic messaging system. This feature enabled it to effectively replace FINRA’s OTCBB, which was a quotation-only system.

All broker-dealers that trade OTCQB, OTCQX, and [OTC Pink](https://www.investopedia.com/terms/o/otc-pink.asp) securities have to be [FINRA](https://www.investopedia.com/terms/f/finra.asp) members and registered with the SEC; they are also subject to state securities regulations. As with exchange-traded securities, investors trading OTC securities are protected from an unethical broker-dealer’s illegal practices by the same SEC/FINRA rules such as [best execution](https://www.investopedia.com/terms/b/bestexecution.asp), limit order protection, firm quotes, and short position disclosure.

## OTCQB Listing Requirements and Compliance

To be eligible, companies must be current in their reporting, undergo annual verification and certification, meet a $0.01 bid test, not be in [bankruptcy](https://www.investopedia.com/terms/b/bankruptcy.asp), have at least 50 beneficial shareholders, each owning at least 100 shares, and a public float in excess of 10% of the total [shares outstanding](https://www.investopedia.com/terms/o/outstandingshares.asp)—some flexibility is offered with regard to the latter requirement.

Companies listed here report to a U.S. regulator such as the SEC or [FDIC](https://www.investopedia.com/terms/f/fdic.asp) and must follow standards to improve [transparency](https://www.investopedia.com/terms/t/transparency.asp)—those who are most likely to be associated with stock promoters and other shady operators will be excluded. The fee for listing on OTCQB markets is $15,600 per annum, with a one-time application fee of $5,000.

## Risks and Considerations for OTCQB Investments

Stocks trading in the OTCQB have many of the same protections as more established, larger stocks. However, they are still mainly considered to be speculative penny stocks.

There is no guarantee that OTC market stocks are of higher quality than penny stocks in other OTC tiers or marketplaces. As such, traders would be well served to implement strong [due diligence](https://www.investopedia.com/terms/d/duediligence.asp) before committing their capital.

## The Bottom Line

The OTCQB is a mid-level market for smaller or new companies from the U.S. and other countries. Companies must follow certain reporting rules and pay a yearly fee to list on the market, making them more trustworthy than Pink Sheets, even though they may not be as strong as those listed on the OTCQX. Trading happens through OTC Link, not big stock exchanges. As an investor, you should do your research because many OTCQB stocks are small or penny stocks, which makes them very risky.

_Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal._

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