Firstrade
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Best Broker for OTC Stocks and Pink Sheets Trading (2021)


Review of the best online broker for pink sheets stocks trading. Top brokerage company to buy OTC BB stocks with low commission and no surcharge.



Best Pink Sheets Stocks Broker


If you’ve had enough of 8% returns from blue chip stocks on the major U.S. exchanges, maybe it’s time to consider trading over-the-counter equities. These investments tend to have much higher return potential; although of course higher risks accompany higher return.

Firstrade customers have access to the OTC marketplace, including the pink sheets. Let’s have a look.


Pricing


Stock trades at Firstrade are free of charge. This generous policy applies to transactions of OTC securities. There is one exception, however. If the security is an American Depository Receipt, there will be an ADR fee. Assessed once per year, the fee ranges anywhere from 1¢ to 5¢ per share. If the security pays a dividend, it’s taken out of the dividend. If not, then the fee is subtracted from the account’s core position.


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Open Firstrade Account



Searching for OTC Securities at Firstrade


The best way to search for over-the-counter stocks at Firstrade is with the broker’s equity screener. It is found under the ‘Research & Tools’ menu. Just click on ‘Stocks’ within the sub-menu and be sure to select the stock screener, and not the fund screener.


Best OTC Stocks Broker


Once you have the appropriate screener open, you’ll want to select ‘Exchange’ under ‘Market Segment.’ When you have this search option selected, you’ll see five exchanges. The first three are the major exchanges (AMEX, Nasdaq, and the NYSE). You won’t find any OTC stocks here.

The next two choices are OTC BB and OTC Pink. These are pretty much self-explanatory. On the Pink Sheets, Firstrade’s screener returned 10,500 stocks.


Stock Profiles


Like big-name stocks, OTC equities have profiles at Firstrade with plenty of information. The broker actually pulls data from Morningstar; so what you see at Firstrade will be the same layout that you would see if you were doing research right on Morningstar.

Examples of information that will be found at Firstrade include financial statements, return history, free analysis and ratings from Morningstar, ownership information, executive leadership, and dividend information.

For OTC equities, a lot of information will be blank. This is because many companies with stocks in the over-the-counter space don’t pay dividends, don’t have earnings histories (or they are negative), or are foreign enterprises with insufficient data.


OTC Stock Examples


In Firstrade’s search results, we found 1st Capital Bank (with ticker symbol FISB). The stock’s most recent trade price is $12.85. Average volume over the past 90 days is less than 2,000 shares. This shows that there’s not currently a lot of interest in this stock.

Despite the low volume, 1st Capital Bank has generated over $5 million in revenue during the past 12 months. The company does not pay a dividend, but Morningstar remains upbeat on it. Currently, the analyst grades FISB three stars out of five.

This is a very high ranking for a stock that doesn’t have much of a history of earnings. FISB's recent cash flow has been negative, a bad sign.

A second example we located was SBES, South Beach Spirits, Inc. This stock has a very low price (just $0.0049 at last tick), but very high volume. Its average volume is over 44,000,000 shares per day.


Best Pink Sheets Broker


Placing a Trade


Placing an over-the-counter trade at Firstrade follows the same usual procedure as any other trade. There’s no need to phone the broker. Just use the handy trade bar on the Firstrade website. Found at the bottom of the browsing window, it makes order entry very simple. Besides taking long positions, the trade ticket permits shorting as well.


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Open Firstrade Account



What are Pink Sheet/OTC Stocks?


While most public companies are traded publicly on the major stock exchanges, like the American Stock Exchange (AMEX), or the New York Stock Exchange (NYSE), or the NASDAQ, pink sheet or OTC (over the counter) stocks do not meet the listing requirements for being listed on these exchanges. These are traded over the counter via an electronic quotation system that is hosted by a company known as the OTC Markets Group. The terms ‘pink sheet stocks’ and ‘OTC stocks’ are interchangeable and refer to the same thing. The OTC Markets Group was founded in 1913 as the National Quotation Bureau. At that time, it was a private corporation that published stock quotes in newspapers on yellow or pink sheets. The term pink sheet stocks stuck and investors still use that term to refer to these types of stocks.


Trading Pink Sheet Stocks or OTC Stocks


Although the OTC Markets Group is not a stock exchange, the company works to provide reliable pricing information while linking sellers and buyers to brokers that will execute orders for these stocks on their clients’ behalf. Investors need to be aware that some brokers or brokerage firms tend to place a limit on the purchase of pink sheet stocks, or these firms may charge a higher commission rate in order to initiate pink sheet stock trades. And with some pink sheet companies, there may not be a sufficient stock volume offered for the investor who is looking to invest a large sum of cash.


Risks Involved with Pink Sheet Stocks


When looking at pink sheet stocks, it is important to know the reason that the stock was unlisted or delisted in the first place. Sometimes this is due to a recent bankruptcy, serious insolvency, small market capitalization, or thin volume. Since most over the counter companies do not file an annual report with the SEC (Securities and Exchange Commission), then they do not offer any independently audited financial reports for investors to look over. Because of this, it can be difficult or even impossible to find unbiased or reliable information about the pink sheet company’s finances.


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Penny Stocks and Pink Sheet Stocks


Although penny stocks are not necessarily pink sheet stock, a trader may use the over the counter stocks that are listed at less than two dollars a share in order to make a speculative bet on the future of a particular company. In fact, some speculators will trade penny stocks that have the possibility of a one-hundred percent increase or more in the stock price. A dishonest speculator might even pump up the pink sheet stock price illegally via rumors in an attempt to dump the stock after buyer increase the stock’s price. This is known as a pump and dump, which is a scheme that can cost investors a lot of money.


Benefits of Purchasing Stock over the Counter


There are obviously some benefits to be reaped, however, when purchasing stocks over the counter with best broker for pink sheets stocks. Many large companies from overseas are not listed on the major U.S. stock exchanges but they can offer investors quite a lucrative return on their investments. Roche, Air France, Adidas, and Deutsche Telekom each are companies that produce billions in revenue each year – and all of them are traded over the counter as pink sheet stock. Foreign pink sheet stock typically offers greater volume and also pays out dividends to stock holders.

Talk to your financial planner about pink sheet stocks or over the counter (OTC) stocks to find out if this type of investment is a smart one for you to consider, based on your own personal preferences and your tolerance of risk.


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Open Firstrade Account