Dealer networks where stocks trade off-exchange, with tiers ranging from audited OTCQX companies down to unreported Expert Market names.
Over-the-counter stocks are quoted by dealers rather than matched on an exchange. Tiers matter: OTCQX requires audited financials and a minimum price, OTCQB requires current reporting and a $0.01 bid, and Pink tiers range from current to no information at all.
Expect wider spreads, no limit-up-limit-down protection of the kind exchange listings get, limited short availability, and brokers that restrict or ban orders in the lowest tiers. Many adrs and foreign-ordinary-shares also trade here, which is a legitimate use of the venue.
Example: a Pink tier stock quoted 1.10 by 1.25 has a 13% spread. Round-tripping 5,000 shares costs $750 in spread before commissions.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
Educational only, not advice. Spotted an error? Post in Site Feedback.