Foreword
The OTC market holds a unique, yet critically important role. Operated by OTCM, it has long provided a platform for emerging companies and smaller investors to grow and prosper and is the only trading venue for OTC stocks. The OTC is an inefficient marketplace where diligent, educated, and disciplined investors can gain an edge that is unobtainable on major exchanges. Yet, recent trends have raised concerns about the vitality of this small corner of the stock market. This manifesto is born out of a keen awareness and experience with these challenges and a belief in the potential of the OTC market, for investors and small companies alike.
Through this document, I hope to spur a candid dialogue, one that acknowledges the problems that the OTC market currently faces but also emphasizes its untapped potential. I lay out a vision for the market’s future, a vision that hinges on enhanced transparency, community engagement, and a proactive, collaborative approach to regulatory engagement.
This manifesto is not intended to be a checklist or action plan but seeks to identify the obstacles and chart a course for overcoming them. It is a call to all stakeholders within the OTC community – investors, traders, companies, and regulatory bodies – to come together, to reaffirm our commitment to this marketplace. It outlines a roadmap that can lead us toward a more dynamic and vibrant OTC market, one that fosters growth, innovation, and opportunity for all participants.
As you read this manifesto, consider it an invitation to be a part of this transformative journey. The OTC market’s revival is not just a challenge but also an opportunity – to build a marketplace that is more resilient, with more legitimate investment opportunities, and more representative of the diverse interests it serves.
Igniting the Revival of the OTC: A Manifesto
The OTC market provides unique opportunities for smaller companies to raise capital, innovate, and grow. It can also provide some of the best early-stage investment opportunities for small investors that are locked out of “accredited only” offerings. Of late, however, this marketplace has seen a troubling reduction in trading volumes, which has in turn precipitated a contraction in capital formation and limited prospects for small investors. That in turn has led to a general lack of interest in the OTC from all market participants. The cause of this has many sources, but the current reality is obvious, there are simply better opportunities elsewhere.
At the core of the solution lies a recognition that market structure is broken and needs a renewal to adapt to the changing economic environment. The revitalization begins by fostering a stronger bond within the OTC community. To achieve this, OTC Markets Group (OTCM) must adopt a more inclusive approach, actively engaging with companies, traders, and investors to ensure their voices are heard. This empathetic connection can guide the actions and product offering of OTCM, aligning its objectives with the needs and aspirations of the community. Since the infamous rule 211 updates, there has been much confusion surrounding Pink Current qualifications, CE designations, Grace Periods, and the Expert Market, etc. An open dialogue between market participants, including retail investors, and OTCM could and should include candid discussion of these market confusing policies. In the end, this open approach will attract more revenue to OTCM.
Building upon this sense of unity, we must then seek to enhance the transparency and analytical depth of the OTC market. An investment in research and analysis could transform the OTC market into a more understood, attractive, and ultimately, a more traded platform. leading to increased trading volumes and improved liquidity. Ideally it is in OTCM’s best interest to make this investment. Creation of an analyst platform would shine a brighter light on the OTC and foster a dramatic rise of investor confidence. Absent an investment from OTCM, an investment led by OTC companies would be logical.
In this spirit of transparency, we should also consider the establishment of OTC-specific ratings agencies and an OTC focused, professional, research-based news agency. By providing reliable, standardized information and investor education, these entities can help mitigate the risks inherent to OTC trading and encourage the influx of new, informed investors.
In parallel to these efforts, there is a need for creation of a CEO working group that would take a more proactive approach towards engaging regulators. Rather than a one-sided appeal coming from OTCM alone, this CEO working group could foster a more inclusive conversation, one that truly represents the interests and concerns of the community. By presenting a unified front, we increase our chances of influencing beneficial policy changes.
This CEO working group could also foster partnerships amongst OTC traded companies and share revenue opportunities. An “OTC Chamber of Commerce” could give small OTC companies greater access to resources, talent, and revenue opportunities. Engaging with strategic partners such as larger corporations, educational institutions, and non-profit organizations can amplify the reach and impact of the OTC market. These partnerships can provide support in areas ranging from mentorship to funding, thereby contributing to the overall growth of the OTC ecosystem.
Rejuvenating the OTC market is an ongoing journey, one that requires a collective commitment from all its constituents. This manifesto is a vision for a renewed, revitalized OTC market. Together, we can rebuild a marketplace that will offer a robust trading environment and a vibrant platform for all market participants.
