Pink Sheets

What Are the Origins of Pink Sheets?

The origins of the "pink sheets" can be traced back to the turn of the 20th century with the inception of the National Quotation Bureau (NQB). Founded by financier Roger Babson and publisher Arthur Elliot, the NQB compiled and published price data on stocks and bonds.[1]

The bureau printed their price information on pink paper, thus the daily report was known as the "pink sheets." Equities that were listed in the report were aptly named "pink sheet stocks". The physical pink sheet publications remained in circulation until the marketplace went digital in the late 1990s.

What Are Pink Sheets?

The "pink sheets" were a publication that historically reported pricing for a group of corporate stocks not listed on a national exchange. Not to be confused with a physical linen sheet set, the pink sheets are a growth-oriented, highly speculative equities sector. Accordingly, a pink sheet stock is an issue that is not traded on a formal exchange but in an over-the-counter (OTC) capacity.

Also referred to as OTC or penny stocks, pink sheet stocks trade without traditional Securities and Exchange Commission (SEC) reporting requirements. However, the OTC Bulletin Board (OTCBB) did require companies to file updated financial reports with the SEC or proper banking and insurance regulatory bodies to be listed.[10]

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The OTCBB was a quotation service that catered to broker-dealers of penny stocks. It was managed by the US Financial Industry regulatory authority and dissolved in November of 2021.[11]

For pink sheet stocks, the unconventional reporting requirements foster concerns over transparency and market integrity. As a result, many such shares are modestly priced and trade with thin volumes.[2] These attributes are often attractive to aggressive risk receptive investors. Nonetheless, OTC stocks trade with limited liquidity, which can lead to wild swings in asset pricing.

OTC Markets Group: Trading The Pink Sheets

Since 2008, the trade of pink sheet stocks on the OTC marketplace has been facilitated by the OTC Markets Group. Currently, nearly 10,000 pink sheet securities are listed for trade on one of the OTC Market Group's three different marketplaces: OTCQX, OTCQB and OTC Pink. The securities are classified and offered for trade according to the transparency and quality of the financial data provided by the listed company.

OTCQX offers listings for companies that meet high financial standards and are current in their financial disclosures.[3] Companies listed on the OTCQB are entrepreneurial in nature, and are in the growth stage of development. The minimum requirements for listing are a stock price of at least US$0.01 and a listed company that must not be currently under bankruptcy proceedings.[4]

Lastly, the OTC Pink marketplace services the trade of companies with little financial disclosure, or companies under duress. The OTC Pink is known as "The Open Marketplace", with limited regulation of the listed companies being required.[5]

Given the reduced regulatory scrutiny, OTC Pink offerings are viewed as being high risk. In fact, instances of fraudulent shell companies are not unheard of on the OTC Pink. Known as "zombie tickers" or "OTC shells," these companies have no assets or financial value. OTC shells are used by stock manipulators as well as in reverse mergers.[12]

Pink Sheets: Types Of Companies Traded

Various types of companies are actively traded via the OTC marketplace. Distressed companies, microcaps and large foreign issues are the various incarnations of pink sheet securities.

Companies under financial distress often find their issues being traded on the OTC market. Upon being delisted from a larger exchange such as the New York Stock Exchange or NASDAQ, a company can be listed for trade as an OTC security. Reasons for delisting vary—failing to adhere to the SEC's filing requirements, a reduction in company credit rating or dismal stock pricing can all be reasons a company gets delisted. NASDAQ and NYSE listings are required to maintain a minimum bid price of US$1 in order to keep their spot on the exchange.[6]

Small companies are also traded on the OTC markets. Due to the fact that there are no minimum capital requirements for a company to be traded OTC, tiny companies known as "microcaps" are able to be publicly traded. A microcap stock is a company with a market capitalisation of less than US$250 million.[7] Microcaps often have few investors and are thinly traded. Bid/ask spreads can become quite large, and volatile pricing swings can quickly become a reality.

It is not uncommon for large foreign companies to consider being traded in an OTC capacity rather than listing on a large national exchange. One major reason for this is the cost of listing on a major exchange. Costs of listing on an OTC market are in the range of US$15,000 per year, while initial costs for listing on the NYSE are in the range of US$125,000 to US$250,000.[8] National exchanges such as the NASDAQ and NYSE are actively regulated by the SEC. Accounting and financial reporting obligations often require a listed company to incur the cost of staffing a separate department for the sole purpose of managing compliance with SEC regulations.

Pink Sheet Securities: Risk Vs Reward

As with all forms of trading and investment, the objective of buying and selling pink sheet securities is to profit. Nonetheless, the OTC markets have a unique collection of risks. Navigating this environment is not simple; it requires a comprehensive understanding of the risks and rewards.


Investors are attracted to pink sheet issues for above-normal returns on investment. The low pricing of pink sheet stocks enables the investor to make sizable purchases. Subsequently, the large position sizes are conducive to generating greater realised gains.

In addition, upstart companies are often traded on the pink sheets before they become successful and listed on national exchanges. Prominent examples of this phenomenon are Monster Beverage Corporation (MNST) and BlackBerry (BB). Both companies rose from the ranks of penny stocks to be listed on the NYSE:[13]

  • MNST traded under US$1 per share until 2005. As of March 2022, MNST held a 52-week valuation above US$76 per share.
  • BB began as a penny stock before becoming a key player in the early-2000s tech boom. After weathering severe competitive challenges, BB topped US$21 per share in 2021.

Many investors study the pink sheets in an attempt to find a company that is a "diamond in the rough." Although stories such as Monster Beverage and BlackBerry are rare, they entice equities investors to enter the OTC markets and search for exponential payoffs.


With the potential of realizing big gains comes an increased risk profile. One of the biggest risk-enhancing factors of pink sheet stocks are the relaxed regulatory and reporting guidelines. Without a uniform regulatory framework, the integrity of the OTC stock trade can be more readily undermined by nefarious participants.

History has shown that stock scams and fraud have been prevalent in the OTC marketplace, with the most common type of scam known as "pump-and-dump" market manipulation. A pump-and-dump stock scheme occurs when a company's stock is touted and then dumped by the stock's owners when the price rises.[9] Unfortunately, operators of these schemes often nestle into the OTC markets and target pink sheet stocks with little public financial information and small floats.

Traditionally, the OTC marketplace and pink sheet stocks have been deemed risky, with their trading environment compared to the "Wild West." Experts recommend investment in pink sheet securities for experienced market participants only, along with the implementation of conservative risk parameters.


Pink sheet or penny stocks are equities offerings traded in an over-the-counter capacity. These issues are not subject to the same regulatory requirements as stocks listed for trade on the NASDAQ, NYSE, or London Stock Exchange (LSE).

The lack of financial transparency gives rise to limited market liquidity and wild swings in pricing. Trading pink sheet stocks in real-time can be a challenge, as extreme market volatility is not uncommon. Nonetheless, risk-on investors are frequently attracted to the extraordinary returns local to penny stocks.

Ultimately, it's up to each person to perform adequate due diligence when trading pink sheet OTC equities. To learn the basics of OTC markets, it may help to review a best seller or two on essential mechanics. After that, extensive research on penny stocks, sectors and trends is advised. When choosing which stocks to purchase, it's important to protect your invested capital as well as possible.

FXCM Research Team

FXCM Research Team consists of a number of FXCM's Market and Product Specialists.

Articles published by FXCM Research Team generally have numerous contributors and aim to provide general Educational and Informative content on Market News and Products.



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