If a company is unable to meet an exchange’s listing requirements—for example, because it is still small—it can still be traded as an over-the-counter security. An over-the-counter security is one that is not listed on one of the major exchanges. Certain other financial instruments, such as bonds, are also considered over-the-counter because they do not trade on a formal exchange. These securities are referred to as “unlisted,” and are traded by broker-dealers who negotiate directly with one another.

OTC stocks generally trade on the Over the Counter Bulletin Board (OTCBB) or as a Pink Sheet stock.

• The OTCBB, or Over-The-Counter-Bulletin-Board, is a regulated electronic trading service managed and regulated by the National Association of Securities Dealers (NASD). It provides Real-Time Composite, last-sale prices, and volume data for over-the-counter (OTC) securities. Companies listed on this exchange must file financial statements with the SEC or a banking or insurance regulator but, unlike Nasdaq or the New York Stock Exchange, there are no listing requirements. Typically, OTCBB stocks are not very stable and are considered risky.

• Pink Sheets are securities listed on the "Pink Sheets" —a daily publication compiled by the National Quotation Bureau—and NOT listed on a stock exchange governed by any securities regulatory authority. This means that, unlike securities listed on a major exchange, Pink Sheet companies are not required to meet minimum listing requirements or file with the SEC. This makes them potentially risky and unpredictable investments.

Penny stocks, which are ones that typically sell for less than $5 a share, are traded on the Pink Sheets or OTCBB.

Please note: Trading OTC securities and Pink Sheet stocks can be very risky, because these securities represent companies that do not qualify for trading on an exchange for various reasons (including bad credit) which will not always be apparent to you. For that reason, trading them is not intended to be easy or convenient, and SogoTrade does not allow it.