Buying Stocks on The New York Stock Exchange Vs. Over-The-Counter Market

Cannabis Companies are being sold on several formal stock exchanges including Canadian Stock Exchange, Toronto Stock Exchange, NASDAQ, and New York Stock Exchange. Each exchange provides a platform for investors to purchase shares of a company listed and registered with the U.S. Securities and Exchange Commission.  But Over-the-Counter stocks are a little different, these company’s stocks are not listed on a stock exchange and are traded via a Broker/Dealer Network as opposed to on a centralized exchange.

Most companies traded on the OTC are smaller and predominantly owned by one individual owner or by a small group of controlling stockholders. Because these stocks are less traded, they offer additional risk.

Stocks that trade on exchanges are called listed stocks whereas stocks that trade via OTC are called unlisted stocks. OTC securities trade by broker-dealers who negotiate directly with one another over computer networks and by phone using the OTCBB. The dealers act as market makers using the Pink Sheets and the OTC Bulletin Board, which is provided by the National Association of Securities Dealers (NSAD).

Most investors and financial advisors consider OTC to be speculative (extremely risky).  This is the main reason why stocks sold on the OTC should only be considered when it meets your Risk Appetite. But remember it is always Risk VS. Reward, but with the added risk of OTC shares comes the possibility of significant returns. Since these shares trade at lower values, and usually for less transactional costs, they provide an avenue for share price appreciation.


Why Do Companies list on the Over the Counter VS Stock Exchange?

Many of the companies on the Over-the-Counter do not meet the requirements to be sold on a stock exchange.  Other companies do not want to pay the expensive fees to be listed on a stock exchange. A major benefit of investing in OTC is lower cost and penny stocks that can offer significant returns. A major disadvantage is that they are highly volatile. OTC also does not list stock prices.  The transactions are completed by “Bid” and “Ask” price.  The “Ask” price is what sellers are willing to take for it. If you are selling a stock, you are going to get the bid price, if you are buying a stock you are going to get the ask price. The difference (or “spread”) goes to the broker/specialist that handles the transaction.

When reviewing Cannabis Companies to invest in you will find many that are sold on the OTC. Please do your research. Not all brokerage firms offer OTC transactions. Once you find a broker to initiate the transaction a market maker will ensure the transaction process is completed successfully.

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