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Over the Counter Bulletin Board

The OTC Bulletin Board (OTCBB) is a regulated quotation service that displays real-time

quotes, last-sale prices, and volume information in over-the-counter (OTC) equity securities.

An OTC equity security generally is any equity that is not listed or traded on NASDAQ or a

national securities exchange. OTCBB securities include national, regional, and foreignequity issues, warrants, units, American Depositary Receipts (ADRs), and Direct

Participation Programs (DPPs).

Features

The OTCBB:

provides access to more than 3,300 securities;

includes more than 230 participating Market Makers;

electronically transmits real-time quote, price, and volume information indomestic securities, foreign securities and ADRs; and

displays indications of interest and prior-day trading activity in DPPs

Pink Sheet

A daily publication compiled by the National Quotation Bureau with bid and asks

prices of over-the-counter (OTC) stocks, including the market makers who trade

them. Unlike companies on a stock exchange, companies quoted on the pink sheets

system do not need to meet minimum requirements or file with the SEC. Pink sheets

also refers to OTC trading.

The pink sheets got their name because they were actually printed on pink paper.

You can tell whether a company trades on the pink sheets because the stock symbol

will end in ".PK".

Third and Fourth Market

The third market comprises OTC transactions between broker-dealers and large

institutions. The fourth market is made up of transactions that take place betweenlarge institutions. These don't concern individual investors because they involve

significant volumes of shares to be transacted per trade. These markets deal with

transactions between broker-dealers and large institutions through over-the-counter

electronic networks. The main reason these third and fourth market transactions

occur is to avoid placing these orders through the main exchange, which could

greatly affect the price of the security. Because access to the third and fourth

markets is limited, their activities have little effect on the average investor.

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Third Market

Trading by non-exchange-member brokers/dealers and institutional investors of

exchange-listed stocks. In other words, the third market involves exchange-listed

securities that are being traded over-the-counter between brokers/dealers and large

institutional investors.

Before selling an exchange-listed security to a non-member, a member firm must fill

all limit orders on the specialist's book at the same price or higher. Typical

institutional investors who take part in the third market include investment firms and

pension plans.

Fourth Market

The trading of exchange-listed securities between institutions on a private over-the-

counter computer network, rather than over a recognized exchange such as the New

York Stock Exchange (NYSE) or Nasdaq. Trades between institutions will often be

made in large blocks and without a broker, allowing the institutions to avoid

brokerage fees.

For example, when a mutual fund and a pension fund enter into a large block trade

with each other, this would generally occur in the fourth market and usually over anelectronic communication network. By executing the transaction this way, both

parties avoid brokerage and exchange transaction fees. They also avoid the

possibility of distorting the market price or the volume traded on an exchange.