Over-the-counter (OTC) refers to the process of how securities are traded for companies that are not listed on a formal exchange such as the New York Stock Exchange (NYSE). Securities that are traded over-the-counter are traded via a broker-dealer network as opposed to on a centralized exchange. These securities do not meet the requirements to have a listing on a standard market exchange.
Trade transactions take place through the Over the Counter Bulletin Board (OTCBB) or the Pink Sheets listing services. The OTCBB is an electronic quotation and trading service that facilitates higher liquidity and better information sharing. A Pink Sheet company is a private company that works with broker-dealers to bring small company shares to market.
The OTC Markets Group operates some of the most well-known networks, such as the Best Market (OTCQX), the Venture Market (OTCQB), and the Pink Open Market. Although OTC networks are not formal exchanges such as the NYSE, they still have eligibility requirements. For example, the OTCQX does not list the stocks that sell for less than five dollars—known as penny stocks—shell companies, or companies going through bankruptcy. The OTCQX Best Market includes securities of companies that have the largest market caps and greater liquidity than the other markets.
Through the OTC marketplaces, you can find the stocks of companies that are small and developing. Depending on the listing platform, these companies may also submit reports to the Securities and Exchange Commission (SEC) regulators. OTCBB stocks will usually have a suffix of "OB" and must file financial statements with the SEC.
Another trading platform is the Pink Sheets and these stocks come in a wide variety. These businesses do not meet the requirements of the SEC. While buying shares of this nature may involve less transactional costs, they are prime for price manipulation and fraud. These stocks will usually have a suffix of "PK" and are not required to file financial statements with the SEC.
Although NASDAQ operates as a dealer network, NASDAQ stocks are generally not classified as OTC because the NASDAQ is considered a stock exchange.
JSX has established strategical relationships with several offshore broker dealers (“OBD”) and North American broker dealers (“NABD”). In turn, these broker dealers have settlement and clearing relationships with well-established custodians that are based in Canada, the USA and Europe.
Based on past conversations with individuals and entities looking to transact in the OTC space, the biggest challenges they have experienced over time are finding a Provider that will work with them throughout the entire process, and finding a Solution that will be around for the long-term.
In the JSX model, we have aligned ourselves with committed strategic partners who have expressed an interest and desire in growing and servicing the OTC market for the long-term.
You provide ticker symbol, stock exchange, desired loan amount and number of shares to be pledged.
After a thorough and fulsome conversation(s) with the prospective client, JSX will determine the most appropriate OBD to have the client open a brokerage account.
JSX sends the prospective client an introductory email that would identify the OBD, and it would include all the pertinent new account documentation that would need to be completed.
DURATION: 5-7 business days after submission
Once the account has been approved, the client would then need to provide the required documentation to complete the DWAC or DRS.
DURATION: 2-5 business days if all goes well
Once the documentation was reviewed and approved by the OBD Compliance Team and/or NABD Custodian, the position would then be allowed to DWAC or DRS.
DURATION: 2-5 business days if all goes well
Once the DWAC or DRS has been successfully completed, the OBD will advise the client, who would then be permitted to sell the position. Once the client has given the OBD with trade instructions, the OBD will then convey said instructions to the NABD for execution.
DURATION: Will vary based on period to sell position
Once the trade(s) are successfully executed, the OBD’s institutional account will be credited with the total sale proceeds of the transaction less the applicable commission fee.
DURATION: Trade Date + 2
The client can then instruct the OBD to wire the proceeds to his / her bank account, but the client would need to provide all the pertinent bank and wire details to the OBD.
DURATION: 24 to 36 hours