What Was the Over-the-Counter Bulletin Board (OTCBB)?

What Was the Over-the-Counter Bulletin Board (OTCBB)?

The over-the-counter bulletin board (OTCBB) was an electronic quotation service provided by the Financial Industry Regulatory Authority (FINRA) to its subscribing members for over-the-counter (OTC) trade data for U.S. stocks. Unlike other OTC platforms, OTCBB was a quotation-only service. In 2020, FINRA announced it was winding down the OTCBB, as the bulk of OTC stock trading occurred on OTC Markets Group's platforms. FINRA officially ceased operations of the OTCBB on Nov. 8, 2021.

Understanding the Over-the-Counter Bulletin Board (OTCBB)

The OTCBB offered traders and investors up-to-the-minute quotes, last-sale prices, and volume information for equity securities traded OTC. All companies listed on this platform had to file current financial statements with the Securities and Exchange Commission (SEC) or another relevant federal regulator.

The OTCBB was created in 1990 after the Penny Stock Reform Act of 1990 stipulated that the SEC must develop some type of electronic quotation system for stocks that could not be listed on one of the major exchanges. Stocks that traded OTC were traded between individuals and market makers using computers and telephones.

OTC stocks on the OTCBB were not part of any major exchanges. This was primarily because OTC stocks tend to be small and volatile, which made meeting listing requirements difficult.

More importantly from the trading standpoint, the bid-ask spread is typically larger for these stocks as they typically trade with less frequency than exchange-listed stocks. Only a select few OTCBB stocks successfully moved from the OTC market to a major exchange.

Special Considerations

For those small companies that could not meet the listing requirements to trade their securities on national exchanges, the OTCBB, and nowadays the current offerings of OTC Markets Group, offered an important alternative.

Small companies need financing from investors to grow, even though their total market value might never rival a mid-cap stock. Investors, in turn, are attracted to the outsized returns that can still occur on the OTC market as some of these firms do find ongoing success and outsized profits.

While these companies use the OTC markets in place of one of the major exchanges, investors need to remember that the OTCBB and OTC Markets Group are not, in fact, actual exchanges but quotation services. All securities traded OTC are, in reality, traded by a web of market makers who input different quotes and trades through a secure computer network that can only be accessed by those who subscribe.

Phasing Out the Over-the-Counter Bulletin Board (OTCBB)

As mentioned above, pretty much all OTC stock quotes and trades are now conducted on OTC Markets Group's platforms, including OTCQX, OTCQB, and the Pink Open Market.

FINRA filed a rule change in 2020 with the SEC that outlined its proposal to cease the operations of the OTCBB, which became effective Nov. 8, 2021. The OTCQB, in particular, effectively replaced the OTCBB as the main market for trading OTC securities that report to a U.S. regulator. As it has no minimum financial standards, the OTCQB often includes shell companies, penny stocks, and small foreign issuers.

OTCBB vs. Pink Sheets

The OTCBB and pink sheets are both quotation services for stocks that trade OTC. The OTCBB was operated by FINRA, while the pink sheets are operated by a private company. The listing standards are generally laxer for the pink sheets. That is, some pink sheet stocks might not have been eligible for listing on the OTCBB. 

Stocks listed on the OTCBB were usually registered with the SEC (except for those not legally required to do so). Meanwhile, stocks on the pink sheets might not file regular reports and might not list with the SEC. Beyond the OTCBB and pink sheets, there are other quotation services. It’s also possible to buy stocks not listed on either directly from a broker.

Correction—Nov. 26, 2021: A previous version of this article misstated the company name for OTC Markets Group.