How the organized over-the-counter US securities market works - What are OTC Markets, pink sheets, OTCQX. Trading hours and features.
The stock exchanges have quite strict conditions for listing; a small but promising business is physically unable to fulfill them.
OTC markets
- this is what solves the problems of turnover of securities of small companies - on the over-the-counter market you can buy promising shares at a price hundreds of percent lower than the cost after the IPO.
The risks are extremely high, but the potential profit is also higher. Below we will discuss what OTC Markets are, why markets of this type exist, and what advantages they provide to traders and investors.
Very expensive advertising - Continue reading below
OTC what is it in trading
First, let’s define what OTS is - Over-The-Counter, which literally means “bypassing the counter.” Or in other words, the sale is made outside the exchange. Such trading is carried out directly between the client and the market maker. The transaction is concluded without the help of third parties between the seller and the buyer.
Classic OTC trading involves conducting safe transactions with a large amount of money with different assets on anonymous conditions. Not everyone is ready to show off their trillions on the stock exchange.
Until 2022, OTC trading was considered the most important tool in the regular financial market. And then he entered the cryptocurrency market. In this article we will look specifically at cryptocurrencies.
For the most part, OTC trading is carried out by large market players, early investors or entire organizations. Since with its help large transactions are made with a huge number of trading instruments. The market for OTC transactions is not locally tied to a specific location and is generally decentralized.
The benefits of OTC trading are significant: when a company does not have the opportunity to issue its shares on the market, and investments are required, transactions are made without an exchange between participants. At the moment, OTC trading is increasingly related to cryptocurrency. It is cryptocurrency that is sold and bought in large quantities. After all, it is difficult to drain long-bought bitcoin reserves on a regular exchange.
The daily sales volume on OTC trading is several times higher than when trading on a regular exchange.
OTC Markets
The over-the-counter (OTC) market is a network of companies that act as market makers for certain low-cost and thinly traded stocks, such as penny stocks. Shares that are traded on an exchange are called listed shares, while shares that are traded in the over-the-counter market are called unlisted shares.
While there are differences between OTC and major exchanges, investors should not experience any major differences when trading. A financial exchange is a regulated, standardized market and is therefore considered safer. It can also be thought of in terms of faster transactions.
How to make money on OTS
Using Bitcoin as an example, we will tell you how people most often make money from OTC trading. And how much more advantageous it is over regular trading.
Let’s say you have such a large amount in your accounts that you are ready to invest in Bitcoin and purchase half a billion coins at $7,000 per coin. It should be taken into account that cryptocurrency is not stable and it will be difficult to carry out a transaction through a regular exchange. As soon as purchasing begins at the desired price, increased liquidity appears.
It is created by robots and market makers. This results in an increased exchange rate that exceeds the initial calculations. Plus, crypto exchanges do not work with anonymous buyers and do not transfer large amounts to them. Therefore, you will need to undergo verification and reveal your identity.
What is good about the OTC exchange at this moment? By giving her half a million dollars, you receive a number of coins worth $7,000 per coin into your account, while maintaining anonymity.
There is no need to reveal your identity and prove where so much money in your account came from - whether it was honestly earned or stolen.
And then you manage your cryptocurrency the way you want. You sell at a better price or increase capital for future sales or make a profit on the difference between the purchase and sale prices.
In addition to anonymity, another advantage of OTC trading is high liquidity. Bitcoins, purchased long ago at a low price, are boldly sold at a soaring market price to a wealthy buyer. A large investor always provides a high level of liquidity and makes payments instantly.
After all, directly selling Bitcoin does not affect its market value. Both sides remain in the black.
What are the risks of over-the-counter trading?
OTC markets have improved in recent years. This results in higher liquidity and better information. Electronic quotes and trading have improved the over-the-counter market. However, over-the-counter markets still present a number of risks that may be less common on formal exchanges.
Regulation
Investors may experience additional risks when trading in the over-the-counter market. While brokers and dealers operating in the U.S. over-the-counter markets are regulated by the Financial Industry Regulatory Authority (FINRA), exchanges are subject to more stringent regulation than over-the-counter markets.
Transparency
OTC market prices are not publicly disclosed until the transaction is completed. In this way, a trade can be made between two parties through the over-the-counter market without others knowing the price of the trade. Lack of transparency can result in investors being exposed to unfavorable conditions. In comparison, trading on an exchange is carried out in a publicly transparent manner. This may give some investors additional assurance and confidence in their transactions. How securities are traded plays a critical role in determining prices and stability.
Volatility
Another factor associated with stocks in the OTC market is that they can be quite volatile and unpredictable. They can also be subject to market manipulation, so risk management techniques are recommended when trading.
A stop loss order will automatically close a position as soon as it moves a certain number of points against the trader. A limit order allows you to close a position as soon as it moves a certain number of points in the trader's favor. For both order types, traders can set triggers at predetermined price levels so that they can determine their profits and losses in advance.
How to make money on OTS shares
There is a special platform where you can view all OTC promotions at the moment. Follow the link and register. Then click “Best Ideas” and read the description of each OTC. Unitedtraders selects and analyzes the most profitable OTCs, and there are hundreds of them every month.
Look in the upper right corner at the risk level. Mostly medium or high. We ourselves do not invest in high ones and do not advise you to. You won’t lose all your money, but it’s very easy to lose up to 20%.
Should I trade on the weekend or not?
Now the news is good and bad at the same time.
- The bad: the charts of many brokers are already not a fountain, and even the quotes are wrong.
- The good: these quotes, although highly modified, are based on real ones.
It is precisely because of the bad aspect that I do not recommend that beginners dabble with OTC. Trading is already a complicated thing, and broker jokes add up.
But I can’t help but mention a good option. These quotes, distorted, disguised, are nevertheless made on the basis of real data. This means that there, in the broker’s chart, the same market heart beats.
Support and resistance lines, channels, trends, reversal patterns work...
There are even a couple of indicators...
Moreover, not only turbo options work, but also regular ones...
Therefore, an experienced trader can trade on weekends, even using such data.
However, the brokers' schedule is extremely poor. There is no normal choice of timeframes, it is impossible to scale the data properly, there is no choice of indicators (and even those are not displayed so well).
That's why. If you are such an experienced dude that you can already work with support and resistance lines by eye, then please, you will be fine in OTC and you need my advice like a stop-cock for a hare. But for everyone else, it’s better to calm down and finally get involved not in games, but in learning.
Who is suitable for OTC investments?
How do you know if you should engage in OTC trading? Let us remind you that trading in general is a type of activity for the purpose of earning money. That is, it is worth understanding that when engaging in trading, most of the time is spent on the stock market and the constant study of companies’ annual reports.
The second condition is to be able to correctly analyze the data received and make decisions based on them. That is, trading is not about luck, it is about logic and informed decisions, and quickly taken measures.
And the third condition is the availability of money for investment. It turns out that if you have a good job or your own business and the ability to provide for your family well enough, if you have available funds or savings, you can invest in a profitable business.
What else is needed for OTC trading? Knowledge of trading rules and a lot of theory and preferably practice. Ability to plan and keep records of completed transactions, recording all shortcomings in order to revise your strategy.
How to make money on VKontakte on a group quickly and for free, read our article.
What to study on the weekend
Take a live chart . He is now frozen, not moving. All the historical data is here - at your fingertips. NOW you can test all your indicators and concepts.
Draw support and resistance lines, channels, see how they work.
Place Bollinger and Stochastic . Rewind a few days. Look on different timeframes. Learn to SEE what exactly these tools show us.
It is on a frozen chart with its historical data that you can train your hand so that you will learn to work with a real chart when it comes to life on Monday.
What amount to start investing with?
Usually, these are such high amounts that it is not possible to immediately present so many zeros when it comes to large institutional investors. Small companies have a significantly lower entry barrier. For example, Bittrex allows clients with an amount of at least $250,000, while Binance allows at least $219,000. There are also lower starting limits, for example, Changelly, the entry threshold is $110,000.
There are even closed groups of institutional investors, where only privileged companies have access. Although now more and more brokers are lowering the entry threshold to OTC exchanges.
Switching from OTC to a major exchange
Shares of publicly traded companies can be traded freely on a stock exchange or over-the-counter markets. OTCs form a quotation system between companies that buy and sell shares over the counter. For some investors, companies that trade on the over-the-counter market are classified as “riskier” investments. This is due to the lack of public information about these companies, as well as the lack of minimum quantitative listing standards.
Many institutional investors have bylaws that prohibit them from investing in companies that trade on the OTC market. Retail investors are typically asked to sign a waiver with their broker or dealer stating that they understand the risks associated with OTC stocks. Even online brokers have restrictions on over-the-counter stocks. This can be a big disadvantage for a small company seeking liquidity.
At some point, a company may decide that it wants to move from the over-the-counter market to a formal exchange. Official exchanges include NASDAQ or the New York Stock Exchange (NYSE).
Benefits of switching to a major exchange
Switching to a larger official exchange can be beneficial. A large exchange such as NASDAQ offers increased visibility and liquidity. The transition can be beneficial for the company's financial efforts. An organization can increase its visibility among institutional investors. Companies moving to a major exchange can also expect an increase in volume and share price.
Requirements
So how does a company move to a major exchange? It must meet the financial and regulatory requirements of the new exchange. These include price per share, corporate earnings, revenue, total value, trading volume and reporting requirements. The reports are locked and can be viewed by the public. Shareholders and markets must receive transparent information on a regular basis.
The NYSE requires all of its listed companies to have 1.1 million publicly traded shares. They must be owned by at least 2,200 shareholders, and the minimum share price must be $4. It also requires an average monthly trading volume of 100,000 shares.
How much can you earn
In fact, there is no answer to this question. You can earn hundreds and thousands of dollars. Or you may not earn anything and, on the contrary, suffer losses. Everything will depend on your experience. For the most part, they make money on the difference in the purchase and sale of cryptocurrency, and this is where the Bitcoin exchange rate comes into play.
With a skillfully developed strategy, increasing your invested capital by 40-50% will not be difficult. But this is all in theory. In practice, things are different. Knowing how the price jumps from $300 to $7,500, it is difficult to predict the outcome of the profit. The situation on the crypto market is unpredictable and changes in the opposite direction at the most unexpected moment for participants. Although, miracles happen.
Poetry of living graphics
Behind the cold indicators, novice traders often lose something very important. Any indicator is a mathematical abstraction based on a very simple principle: take the old price for a certain period, do something with it, and you’re done.
And the course is alive. And this is not a figure of speech. Look at it differently. This is a fight between bulls and bears, this is a fight between people, real traders in investment banks.
This is why indicators do not work like a magic button - they perform only mathematical operations, but do not take into account all the human trading psychology that lies behind the charts.
A schedule is creativity. And you are not limited in any way. Go to TradingView and you will see this.
A graceful butterfly soars in the darkness of the night... this is the Gartley butterfly
A cobweb froze between the tree branches...
Zigzag lightning flashes in the sky... Elliott waves and support/resistance lines
Night disco… strategy “Prism”
Some have very advanced spatial thinking:
Remember - after studying the basic principles of technical analysis, then only your imagination will be your limit. There are no boundaries. There are only basic rules, basic, fundamental ones - and on the basis of them you can build the castle of your strategy.
Of course, if it is tested in practice by the number of successful transactions 
Problems with OTC trading
There are also problems with OTC trading. Often, problems are related to fraud. And if there is a sharp surge in activity on crypto exchanges, then most likely there has been a hack. Hackers want to leak stolen goods. There have been cases where false information was given about the availability of cryptocurrency and then the scammers absconded with the money they received.
The conclusion suggests itself. OTC trading is about a profitable purchase and a profitable sale. But in any case, knowledge of the basics of trading and the operation of the exchange is the main skill in this matter, which will help control assets. This is also a good way to spend your weekend usefully. A few hours on the laptop, and the profit is in your pocket. The main thing is to stock up on capital and not overreact to the collapse of the crypto market in some periods.
Successful investments and high profits.
Subscribe to our telegram channel @hitrylis1 in which we talk in detail about investments. And we not only tell you, but also try everything for yourself. The goal is to accumulate capital of $1,000,000 in 10 years and live on dividends. If the @hitrylis1 link does not open, copy it, open Telegram and paste it into the search.
What can you trade on the OTC market?
OTC markets and exchange markets are two standard ways of organizing financial markets. Shares must be traded either on an exchange or in the over-the-counter market. However, some stocks are traded both on the exchange and in the over-the-counter market.
Debt securities and other financial instruments such as derivatives are traded on an over-the-counter basis. The stock also trades OTC. Certain instruments, such as bonds, are not traded on a formal exchange - they are also traded on OTC by investment banks. Over-the-counter systems are used for trading unlisted stocks, examples of which are the OTCQX, OTCQB and OTC Pink trading platforms (formerly OTC Bulletin Board and Pink Sheets) in the United States. They provide an electronic service that provides traders with the latest quotes, prices and volume information.
OTC Markets Group
OTC Markets Group is an important part of the OTC market. It is a network of more than 100 broker-dealers headquartered in New York. The Group values and trades a wide range of securities on its over-the-counter markets platform. OTC Markets Group provides pricing and liquidity information for nearly 10,000 over-the-counter securities. It operates many of the most well-known networks such as OTCQX Best Market, OTCQB Venture Market and Pink Open Market.
Benefits of OTC Markets
The over-the-counter market also consists of shares of companies that are unwilling to meet the strict requirements of large exchanges. Some businesses do not want to pay the cost charged by the exchange. The NYSE has a schedule of commissions and fees for its services. Administrative fees can reach up to $250,000 per year. Their listing fees can go up to $150,000 depending on the size of the company. Various other fees may also apply.
OTC transactions are not subject to exchange commissions. The OTC market helps companies and institutions promote stocks or financial instruments that do not meet the requirements of regulated stable exchanges.
The OTC market can be divided into two categories. The client market, where dealers trade with their clients, and the interdealer market, where dealers trade with each other. The price a dealer charges may vary depending on who they deal with.
How to buy and sell securities on the over-the-counter market
It all starts with choosing a broker and opening a brokerage account on the organized over-the-counter market.
Keep in mind that there are no official prices for any securities here, and the broker has the right to set a price that is beneficial primarily for himself.
You contact the broker, indicate what result you want to get from your investment.
The broker accepts the application and names the price, taking into account the commission interest due to him, which forms the basis of his income.
You will have to carry out currency trading without an intermediary.
How to act as an unqualified investor
A specific example with Sberbank - it has the Sberbank Investor application with a special tab or the ability to access the over-the-counter platform through the QUIK terminal.
- You can submit applications here on weekdays from 10-00 to 18-40 Moscow time. The application states that the counterparty as a legal entity is registered in another country - this is necessary for conducting international payments.
- Having accepted the application, the brokerage office immediately opens an account in the currency you specify. The amount or securities for this amount will be reserved until the time of settlement.
- As soon as your application is satisfied at the most favorable price for you, your income will be transferred to you.
- To cancel an application, you must contact the broker, since this is not possible in the application - the application will be canceled automatically after 30 calendar days.
Why do OTC brokers need options?
Unprofessional, inexperienced traders who want to make trades have a very significant demand for trading operations on weekends.
This is to the advantage of the broker, because the absence of a live chart makes it impossible to accurately analyze the market situation and practically eliminates the logic of predicting price movements. Naturally, there are more unprofitable transactions and company incomes increase significantly.
An additional purpose is advertising - people relax and may accidentally become involved in binary options trading. Then they turn into regular customers. In any case, this is beneficial for the BO broker.
Functionality for the customer
Your personal account consists of the following sections:
- "Procurement" . Here the customer creates and stores all his requests.
- "Search for offers." This section is used to search for offers from suppliers.
- "Orders and contracts." In this section, the order and accompanying documents are generated.
- "Basket". This contains the products selected by the customer in the offer search section.
Otherwise, the customer’s personal account coincides with the supplier’s profile.
How to take part in the auction
After passing verification procedures and receiving a personal secure signature, OTS clients can participate in contracts. The choice of contracts is usually determined by the direction of activity of the enterprise, the volume of its capacity and working capital. The service allows you to sort published orders, select the ones you need, and plan your participation.
Auctions and competitions take place in several stages, the purpose of the events is to determine the best supplier. The criteria for identifying the winner are set by law and the preferences of the customer. The latter is guided by current practice. For example, water utility companies are unlikely to accept Chinese analogues of shut-off valves.
OTS how to participate in bidding
Stages of the competition:
- Publication of the contract, its terms, documentation package;
- Accepting applications. It is divided into two parts, each of which represents a separate, complex stage. The first part examines the companies themselves, checking the absence of unscrupulous suppliers in the register, the level of business reputation and other specific requirements. At the same time, customer requests must comply with the Laws. Part two contains specific commercial offers. By this point, performers should already calculate the economic effect of participation;
- Admission to bidding. At this stage, applicants can find out how many applicants have applied;
- The further participation procedure takes place in accordance with the regulations. Depends on the type of trade;
- Receive a protocol with the results of the auction.
What is bought and sold on over-the-counter markets
A large set of tools is available only to experienced traders. To have this status, one of three conditions is necessary:
- have a capital of 6 million rubles
- have experience working in financial institutions
- be the owner of a special certificate.
Professional traders tend to choose emerging market bonds with higher potential returns than developed country bonds. Due to this, their portfolios are more diversified, and currency risks are lower.
For example, part of your expenses is in German marks, the other in euros. It will be profitable to buy Eurobonds in these currencies - OFZ, Eurobonds of Russian and foreign enterprises, as well as government Eurobonds of different countries.
For inexperienced traders, some OFZs are available in euros and dollars with the possibility of redemption in 2047 and corporate Eurobonds, including VEB with redemption in February 2023 (the nominal value of which is €1 thousand, it pays a coupon of €40, 32 once a year.
The good news is that by the end of this year, securities of 50 foreign companies will appear on the Moscow Exchange in the over-the-counter operations section. Until now, the minimum purchase had to be $50,000 or more.
What are the solutions to these problems?
Trading platforms are actively working to create custody solutions for large investors.
Analysts expect the OTC market to continue to grow in the future. Accordingly, large trading platforms will try to adapt to growing demand. For example, the fifth-largest asset manager, Fidelity, is launching cold storage to serve firms that provide services to large clients. At the same time, Coinbase is also addressing issues related to OTC trading.
Even more interesting information about trading digital assets can be found in our crypto chat for hodlers. We are waiting for you there.
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Myths about OTC binary options
Today, the stock trading industry is developed and attracts many people. Therefore, a great many myths have arisen in trading OTC binary options, since there will always be losers, dissatisfied people, competitors and simply illiterate people.
All of them deliberately or mistakenly spread speculation. The most common myths about OTC binary options are: They need to be taken with a certain amount of skepticism.
Misconception 1. Brokers specifically work against traders on weekends. Large, reliable companies do not interfere with quote values. They do not have such opportunities; moreover, they regularly report to regulatory authorities.
Misconception 2: You can't make money on OTC options. Yes, it’s not easy to predict price movements, but it’s quite possible to make a profit. For trading transactions on weekdays, knowledge of the laws of the market and an understanding of the characteristics of assets and the influence of fundamental factors are required. On non-working days, the luck factor is more important.
How to register
Verification of new clients on the OTC electronic platform is carried out in a simplified mode. This significantly saves applicants’ time on confirming the information provided for control. At the first stage of authorization, you must provide data in the survey section for the OTC tender:
- Last name, first name and patronymic of the applicant;
- E-mail address;
- Personal data for subsequent visits to the management section.
At the end of the application, it is also necessary to indicate the status of the company applying for cooperation with the tender operator.
OTS registration
Required documents
The second stage of checking the applicant’s data is document control. What copies will need to be sent through the personal area of the site to undergo accreditation:
- Limited Liability Companies (LLC) provide: All pages of the Charter;
- Extract from the state register of legal entities;
- If an electronic signature (EDS) is issued to a trusted person, documents confirming the authority of the employee will be needed;
- When an authorization token is issued to a manager, an order of appointment and a decision to create an LLC will be required;
- For security purposes, businesses are additionally asked to approve a maximum amount of corporate transactions.
- Passport pages, everything;
Documents for registration
Among the services provided by the electronic trading service is the issuance of crypto-protection means. To obtain an electronic signature, the list of documents is expanded:
- From the manager - an identity card, SNILS (insurance number of a citizen’s individual personal account in the compulsory pension insurance system). If a representative acts - a power of attorney.
- The certification center additionally requests copies of documents confirming employment and transfer of authority.
- Application to join the regulations of the certification center and create a certificate, consent to the processing of personal data.
For applications from foreign residents, a translation certified by a notary or consulate will be required. Registration of an electronic signature will allow the token to be used on most Russian platforms, including the Russian Commodity and Raw Materials Exchange (RTS).
Binary weekend
Well, here they are, choose a trader’s weekend:
- broker's schedule with its restrictions;
- frozen live graphs as learning opportunities;
- vodka, women and restaurants;
- usual pleasant Sunday relaxation.
Each will find its own use for the weekend. Personally, I try to spend time with my family, read a book on technical analysis, and lazily go through the indicators that caught my attention.
Trading can be stressful, so the weekend is a time to recover, don't forget that. There is no need to play around with OTS, it’s better to rest and gain strength before working days.
Purchase search
To find the purchases you are interested in, you must complete the following steps:
1. Go to the otc.ru page.
2. In the search bar, enter keywords for the search, or a specific purchase number or details of a specific customer.
3. Under the search bar, expand the list of advanced settings.
4. In the drop-down menu, you can set the filters you need: select categories of goods or services, determine their cost, exclude certain words from the search, etc. By default, at the very end of the list is consent to search using keywords in the tender documentation. If the user wishes, this item can be removed.
5. Click Find.
The list of purchases that appears can be filtered by publication date, price, closing date for accepting applications and other parameters. It is also possible to view archived tenders. This can be useful in cases where you intend to receive an order from a specific buyer and want to analyze his behavior in the market.
