Within the US capital market there are major and minor stock exchanges. The NYSE, American Stock Exchange and NASDAQ are considered major exchanges while the Over-the-Counter (OTC) is considered a minor exchange. Companies that trade on the major exchanges are considered large, medium or small cap. Companies that trade on the OTC are considered microcap.

Quotation and trading on the OTC are done electronically similar to NASDAQ. Although governed by the same SEC guidelines, OTC is more flexible than the major exchanges. This exchange allows for small private companies to become public at a moderate cost. It could also be a good venue to gain experience running a public company. Companies that do well can apply and be listed on a major exchange such as American Stock Exchange or NASDAQ.

There are two types of public entities that trade on the OTC, Bulletin Board (BB) and Pink Sheet. Companies quoted on the OTC BB must be fully reporting (i.e. current with all required periodic SEC filings). SEC filing is optional for Pink Sheet companies. Most Pink Sheet companies do not file and thus considered non-reporting.

OTC Listing Requirements

There are no specific requirements to list on the Pink Sheets. Listing candidates can be development stage or established companies. There is also no requirement for periodic filings with the US Securities and Exchange Commission (SEC).

There are no specific requirements to list on the Bulletin Board other than audited financials. Listing candidates can be development stage or established companies. Companies listing on the Bulletin Board must comply with the SEC’s regulations and the file period reports.