OTCQB is the over-the-counter (OTC) market exchange for the middle tier of three marketplaces for trading OTC stocks offered by the OTC Markets Group.
This middle tier is also known as the Venture Market, and it consists of entrepreneurial and development stage U.S. and international companies. OTCQB companies have to report their financials and submit to some oversight.
Learn more about what companies trade on the OTCQB and how this exchange compares to major stock exchanges as well as other OTC exchanges.
Definition and Example of OTCQB
OTCQB, or the Venture Market is the over-the-counter (OTC) market exchange for the middle tier of three marketplaces for trading OTC stocks offered by the OTC Markets Group Inc. It includes over-the-counter stocks that do not qualify for listing on the major exchanges or on the OTCQX (top tier) of the OTC market.
Before explaining more about OTCQB, let’s review what OTC securities are. OTC stocks are those that are not listed on a major U.S. exchange such as the New York Stock Exchange (NYSE) or the Nasdaq. Many of these companies are smaller and do not meet the requirements to be listed on a major stock exchange.
To be eligible to trade on the OTCQB, companies must be current in their reporting and undergo an annual verification and management certification process. Companies must meet certain criteria like meet a minimum bid test of $0.01 per share and must not be in bankruptcy.
OTCQB is recognized by the Securities and Exchange Commission (SEC) as an established public market. The OTC platform allows companies to provide public information that is necessary for investors to analyze, value, and trade a security.
- Alternate name: Venture Market
DMG Blockchain Solutions Inc., an integrated blockchain and cryptocurrency company, is an example of a business that trades on OTCQB under the ticker DMGGF. The company had a market capitalization of about $95.4 million in early January, with shares trading near $0.58.
How OTCQB Works
The Financial Industry Regulatory Authority (FINRA) regulates broker-dealers that operate in the OTC market. The OTCQB market is run through OTC Link, an electronic inter-dealer quotation system that is owned and operated by OTC Markets Group.
OTC Markets Group listed more than 12,000 companies on three stock exchanges as of early 2022:
- The OTCQX Best Market: for established, investor-focused U.S. and international companies. It is the most selective of the three tiers, has the highest reporting standards, and has the strictest oversight.
- The OTCQB Venture Market: for entrepreneurial stage and development stage U.S. and international companies. QTCBQ companies have to report their financials and submit to some oversight.
- Pink Market: also known as Pink Sheets, includes companies that are not current with their disclosures to the SEC. It has no reporting requirements and may also include bankrupt companies, which the other two tiers do not.
The OTC website lists eligibility requirements for companies that want to be listed on the OTCQB market. These include:
- Audited annual financial statements that are prepared in accordance with U.S. GAAP standards or, for international reporting companies or alternative reporting companies, listed on a Qualified Foreign Exchange
- Current disclosure available through SEC reporting or other qualifying standard
- Meet minimum bid price test of $0.01
- Not be in bankruptcy
- Have at least 50 beneficial shareholders, each owning at least 100 shares.
- Have a freely traded public float of at least 10% of the total issued and outstanding of that security
Companies listed on the OTCQB market also must have a board of directors that includes at least two independent directors as well as an audit committee made up of a majority of members who are independent directors.
What It Means for Investors
Investors should be cautious when investing in stocks listed on OTCQB.
Although the eligibility requirements mentioned above are intended to ensure that the companies listed on OTCQB have a level of stability, they are still mostly microcap or “penny stocks.” OTCQB stocks can be highly volatile, susceptible to price manipulation, and there is often limited public information available on the companies themselves.
- OTCQB is the over-the-counter (OTC) market exchange for the middle tier of three marketplaces operated by OTC Markets Group Inc. for offering OTC stocks.
- OTCQB, also known as the Venture Market, is for entrepreneurial stage and development stage U.S. and international companies.
- Although companies listed on OTCQB must meet minimum eligibility requirements and undergo annual verification, the companies listed are mostly microcap stocks that present higher risk than most companies listed on major stock exchanges.
- The other two tiers operated by OTC Markets Group are OTCQX, which features established U.S. and international companies, and Pink Sheets, which lists the most speculative companies.