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At StockBrokers.com, we are committed to helping investors learn more about the market. While most investors have likely heard of the Pink Sheets market or the OTCBB market, many don’t know as much about these areas as they probably should. Every marketplace that is available to investors is a potential investing or trading opportunity, but you must know the ins and outs of that market before putting your hard earned capital to work. Many use Pink Sheets and OTCC BB interchangeably as if they are exactly the same market, which is not the case at all. In fact, there are many crucial differences between these two marketplaces. First, let’s take a closer look at the Pink Sheets and the OTCBB marketplace. Then we will examine the similarities and differences between the two.

Pink Sheets Explained

Pink Sheets LLC is actually a privately owned company based in the state of New York. Pink Sheets are not the same type of marketplace as many of the other exchanges, rather they offer a real-time quotation service for stocks in the OTCBB as well as stocks that are unlisted at any other exchange because of rules and regulations. Most frequently a company will offer their shares on the Pink Sheets market if they are unwilling to disclose financial information. In recent years, some large foreign companies have made the move to list their shares on Pink Sheets. Pink Sheets has seen its popularity grow quite a bit over the last few years because of their move to a more high-tech QTCQX marketplace.

Over-The-Counter-Bulletin Board (OTCBB) Explained

The OTCBB is an electronic quotation system that displays real-time quotes, sale prices, and volume information for thousands of over-the-counter securities that are not listed on the NASDAQ or the NYSE. Companies who go public on the OTCBB must adhere to the Sarbanes-Oxley Bill, and they must be audited on a yearly basis. In general, stocks that trade on the OTCBB are typically penny stocks and the bid/ask spread can be quite large because of the low volume.

Pink Sheets and OTCBB Similarities

  • Both require a company to have at least 35 shareholders to be listed.
  • There are no minimum revenue or asset requirements for companies listed.
  • Both require a company to be audited by registered accountant before they are initially listed.

Pink Sheets and OTCBB Major Differences

  • A company listed on the OTCBB is required to file a quarterly financial report with the SEC, while companies on Pink Sheets are not required to report financial statements at all.
  • Companies who trade on the Pink Sheets are not required to adhere by the Sarbanes-Oxley Bill, while those on the OTCBB are.
  • Companies who list on the OTCBB generally do so because of the extra prestige, while those who choose to list on the Pink Sheets generally do so because of the lower costs.

Pink Sheets and OTCBB Summary

All in all, any stock that trades on the Pink Sheets or the OTCBB is a very risky stock. Pink Sheets are starting to bring in some large foreign companies who want to list in the United States, but don’t want the large costs associated with the NYSE or NASDAQ listing. Be advised that because Pink Sheets don’t have any financial reporting rules, it is very difficult to quantify how a company is doing. If you decide to dive into the Pink Sheets or OTCBB marketplaces, make sure you do so with an online broker who has clear cut rules on trading these speculative stocks.

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