OTC Markets Group Inc. (OTCQX: OTCM), operator of financial markets for 10,000 U.S. and global securities, today announced its trading statistics and news highlights for 2017.
- Total dollar volume of OTCQX®, OTCQB® and Pink® securities was $246.7 billion compared to $192.9 billion in 2016
- Dollar volume of OTCQX, OTCQB and Pink companies that provide current information to investors was $241.9 billion, representing 98 per cent of total dollar volume across all markets and demonstrating continued progress in using data-driven standards to encourage OTC issuer disclosure for investors and brokers
- Sixty-one companies graduated from the OTC markets to a national stock exchange, 46 of which came from the OTCQX and OTCQB markets
- OTC Markets Group Indices finished strong in 2017 as the OTCQX Composite index closed out the year up 23.3 per cent, outperforming all the major U.S. indices. The OTCQB Venture index closed up 6.5 per cent for the year
- OTCQX disclosure standards recognized by 27 states for Blue Sky secondary trading exemptions; OTCQB recognized by 24 states
- Announced new policy on stock promotion and best practice guidelines for issuers to provide investors with better information and risk warnings
- Expanded the Transfer Agent Verified Shares Program to include 15 leading transfer agents, improving the availability and accuracy of share data for OTCQX®, OTCQB® and Pink® securities.
Increased standards and data availability continue to improve quality of OTC Markets
Increased OTCQX and OTCQB market standards combined with growing recognition of our market designations and company information by investors, broker-dealers and market data distributors and the deployment of new tools such as the OTC Compliance Analytics continued to improve the transparency and quality of information available for securities traded on OTC markets in 2017.
Investors continued to demonstrate a wariness for Pink No Information companies which provide no disclosure to investors and which OTC Markets clearly labels with a “Stop” sign. Only 1.3 per cent of total dollar volume in 2017 was in securities of No Information companies, compared to 0.7 per cent in 2016.
In March, OTC Markets Group raised the standards for the Limited Information tier. 227 companies were downgraded to Pink No Information as a result of this change to our disclosure standards.
OTC Markets Group continued to outperform other leading global venture markets in graduating companies to a stock exchange. Sixty-one companies graduated from the OTCQX, OTCQB and Pink markets to a national securities exchange in 2017, 46 of which came from the OTCQX and OTCQB markets. In comparison, 16 companies graduated from Canada’s TSX Venture Exchange to the Toronto Stock Exchange in 2017 and four companies graduated from London’s AIM market to the London Stock Exchange.
Celebrating 10 years of growth — OTCQX® Best Market
In March 2017, the OTCQX® Best Market celebrated its 10th anniversary. OTCQX distinguishes established companies that meet high disclosure, financial and governance standards. It offers a transparent and efficient public trading market for reputable U.S. and international companies and provides a cost-effective, less burdensome alternative to a stock exchange listing.
In 2007, OTCQX launched with an initial 12 Founding Member companies. OTCQX has grown to 425 U.S. and international securities totaling $1.6 trillion in market capitalization. Today, OTCQX securities trade a combined $56 billion in annual dollar volume, representing 23 percent of the total annual dollar volume of all OTC securities. The premium OTCQX market is widely recognized by federal and state regulators, broker-dealers, investors, market data distributors and the international investment community.
Focused efforts on educating small-cap companies
As part of our ongoing efforts to educate and address the needs of small cap issuers, in spring 2017 OTC Markets Group conducted its inaugural Small-Cap Survey. OTC Markets Group engaged 117 CEOs and CFOs of small cap U.S. and international companies that trade on the OTCQX and OTCQB markets on the challenges they face when trying to increase investor interest in their stock. In June 2017, the results were released with key findings indicating that small cap companies have key opportunities to attract new investors and raise capital.
This year, OTC Markets Group also partnered with IR Magazine to launch an educational series dedicated to addressing small-cap investor relations issues. Topics included laying the foundation of a small-cap IR program and offering best practices tailored to small-cap companies to attract new investors.
The launch of an eBook, Small-Cap Investor Relations: Best Practice culminated the programming, providing a comprehensive overview of IR for small-cap companies.
Increased industry award and product recognition for market data Distribution and Trading Technology Network
OTC Markets Group continued to expand its market data distribution network in 2017, with an increase in the number of firms using OTC Markets Group data files to assess risk and provide greater investment opportunities on OTCQX, OTCQB and Pink securities to more investors.
The OTC Compliance Analytics Product received the award for “Most Innovative Market Data Project (Vendor)” at the 2017 Inside Market Data/Inside Reference Data Awards. By quantifying compliance data points, the Analytics Product helps broker-dealers, banks and asset managers automate risk processes and identify opportunities.
In addition, OTC Markets’ OTC Link® ATS also won “Best ATS Client Service” at the Fund Technology and Wall Street Letter Awards. The annual awards recognize providers, including technology providers, data specialists and exchanges, catering to the institutional asset management community. OTC Link ATS was recognized for providing superior client service to the traders who use our ATS.
Execution Quality product
In November 2017, OTC Markets Group introduced a new Execution Quality product to better provide transparency to our execution quality of traded OTC securities. The industry unique algorithm allows both the retail and wholesale community to leverage the same set of information to evaluate Best Execution statistics.
The algorithm improves upon the industry standard 605 execution quality calculation by utilizing the full depth of book for quotes on OTC Link ATS. A new web-based viewer allows users to filter their results by a number of parameters (e.g., date range, symbols, sub-markets, notional value, etc.). Retail clients that provide route information can compare the execution quality of their various route destinations. Conversely, wholesale clients that provide customer information can compare the execution quality they provide their various customers. The viewer also displays the actual OTC Link quote montage at both time of order entry and time of order execution.
Pivotal mark reached for OTCQX and OTCQB recognition by states for Blue Sky Exemption
In November 2017, Pennsylvania became the 27th state on our blue sky map. Broker-dealers rely on individual state blue sky laws to determine whether they can legally recommend a security or distribute research on that security to investors residing in a given state.
Each of the 27 states has tailored its approach to granting blue sky exemption, using formal rule changes, no-action letters, administrative orders or existing trading exemptions.
24 states granted Blue Sky status to both the OTCQX and OTCQB markets: Alaska, Arkansas, Colorado, Delaware, Georgia, Hawaii, Indiana, Iowa, Maine, Mississippi, Nebraska, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Washington, West Virginia, Wisconsin and Wyoming.
Idaho, Kansas, and Vermont recognize only the OTCQX market
OTC Markets continues to work directly with state regulators to obtain recognition for our premium OTCQX and OTCQB markets based upon the audited financials and easily accessible, free, online disclosure of information these companies provide to the public through our website, www.otcmarkets.com. We are committed to working with the North American Securities Administrators Association (NASAA) and the remaining states to determine how best to qualify OTCQX and OTCQB traded securities based on their unique regulatory environment and financial standards.
Enhanced market transparency and new policy on Stock Promotion
In November 2017, OTC Markets Group announced a new stock promotion policy establishing best practices for public companies designed to improve overall market transparency for investors and better address the problem of fraudulent stock promotion. The new policy and best practices codify a core principles of OTC Markets Group’s disclosure-based philosophy and the OTCQX and OTCQB Rules.
As part of OTC Markets ongoing effort to improve overall market transparency, we plan to begin to publicly-identify securities that are the subject of stock promotion by placing a “promotion” risk flag next to the stock symbol on our websites and in our market data feeds. Promotion risk flags are designed to augment OTC Market’s current “Caveat Emptor” policy, in which a skull and crossbones icon is displayed next to a stock symbol—indicating to investors that there may be a reason to exercise additional care and due diligence before investing in the security.
Collectively, these initiatives reinforce OTC Markets Group’s ongoing market surveillance programs, created to provide better information, enhance investor protection and ensure a fair market pricing process.
Expanded transfer agent verified share program
In 2017, OTC Markets Group expanded its list of leading transfer agents participating in our Transfer Agent Verified Share Program, adding leaders such as Computershare US, Broadridge Financial Solutions, Inc. and Continental Stock Transfer and Trust. The program, launched in October 2016, is an initiative designed to provide investors with current and reliable share data on OTCQX, OTCQB and Pink securities. The program enables stock transfer agents to report their clients’ share data, including authorized and outstanding shares, to OTC Markets Group on a regular basis via a secure, electronic file transfer.
Through 2017, 15 transfer agents have joined the program and OTC Markets Group is actively working to engage and enroll additional firms.