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The Transformation of OTC Markets Has Started


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I have called a ton of people today… all say the same thing, the BB market is going to be greatly diminished going forward…. here is the presentation OTC Markets just sent to me… powerful info inside….. Send to your friends. A transformation is upon us.

The Transformation of OTC Markets Has Started

  1. 1. OTC Markets Group Inc.January 2011
  2. 2. Who we areOTC Markets Group operates the worlds largest electronic marketplace for tradingunlisted stocks. Our open network of competing broker-dealers provides investorswith the best prices in over 10,000 OTC securities. We organize the OTC intothree tiers: The Quality Controlled Marketplace The U.S. Reporting Company Marketplace The Speculative Trading Marketplaceso investors can identify the level and quality of information companies provide.Through innovative technology and exceptional customer service, our mission is tocreate a transparent and efficient world-class marketplace. 2
  3. 3. Our Network• 160 Market Maker, Agency Broker, and ECN Broker‐Dealers competing on our  platform to provide execution services for investors in unlisted securities• Easy investor access through any U.S. broker‐dealer• Seamless connectivity to broker‐dealer order management systems• Real‐time prices and tiers on all major online brokers (E*Trade, TD  Ameritrade, Schwab, Fidelity, Scottrade, etc)• Distribution of prices and tiers through major market data vendors and  financial portals• With 800,000 visits and 24 million page views, is the  central information source for investors interested in unlisted stocks 3
  4. 4. State of the OTC – 2010 VolumesDollar Volumes have rebounded from Flash Crash hangover& OTC Link volumes continue to increase. 09-10 OTC Market Quarterly $ Volume 45 40 35 30Billions 25 20 15 10 5 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 2009 2009 2009 2009 2010 2010 2010 2010 4
  5. 5. State of the OTC – FINRA’s BB Priced Quotes OTC Markets FINRA BB Overview70000 61,652 4,396 Priced Quotes6000050000 21 BB Only Securities40000 2,858 Dually Quoted Securities – Down from30000 3,149 in Q1 201020000 1,667 BB securities with No Inside Price being10000 created (< 2 priced 4,396 quotes) 0 Q4  Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 5
  6. 6. State of the OTC – Trading By TierDecember 2010 – 96.2% of OTC Trading Volume occurred incompanies making current disclosure to investors. OTC Market Tier # Securities Monthly $ Vol. % of Total $ Vol.OTCQX 159 $1,971,091,273 13.8%OTCQB 3,851 $3,970,777,887 27.9%OTC Pink - Current Information 1,830 $7,762,691,726 54.5%OTC Pink - Limited Information 749 $339,886,184 2.4%OTC Pink - No Information 3,375 $207,888,915 1.5%FINRA BB Only 22 $14,545 0.0001%Total Quoted OTC Market 9,986 $14,252,350,531~3,300 securities only represented 1.5% of dollar volume.No Information = No Trading. 6
  7. 7. State of the OTC – Trading AcrossAlternative Marketplaces Average Average Average $ # $ Volume per Trades Per Amount per Market Securities $ Volume Trade Count Security Security TradeOTCQX 159 $1,971,091,273 114,685 $12,396,800 721 $17,187LSE AIM 1,194 $5,627,687,548 498,894 $4,713,306 418 $11,280OTC Pink - Current 1,830 $7,762,691,726 610,890 $4,241,908 334 $12,707TSX Venture 2,147 $4,588,986,695 1,243,502 $2,137,395 579 $3,690OTCQB 3,851 $3,970,777,887 1,156,349 $1,031,103 300 $3,434Average $ Volume per Security measures marketplace liquidity.Average Trades per Security gauges the amount of investors participating in a marketplace.Average $ Amount per Trade is an indication of the types of investors participating in a marketplace.Source: 30 December 2010, OTC Markets Group, TMX Group, LSE 7
  8. 8. An Increasing Number of Globally RecognizedCompanies Trade OTCQX 8
  9. 9. OTCQX Offers Greater Visibility and AccessVisibility Top Tier of the OTC Markets Highest levels of trading activity & liquidityQuality Control Financial Standards Qualitative Review Sponsorship by DAD/PALTransparency Real-Time Level 2 Quotes Easy investor access to company information & financial disclosureAccess Blue Sky Monitoring & Advisory Broker-dealer and investment advisor compliance 9
  10. 10. More Open Reporting Options ThanTraditional Exchanges 1. SEC Reporting Standard 12(g) registered and reporting (files10Ks or 20Fs, etc.) 2. International Information Standard Exempt from registration under 12g3-2(b) and files home country disclosure in English 3. Alternative Reporting Standard For companies not required to file with the SEC that have fewer than 500 record holders and less than $10MM in assets. 10
  11. 11. DAD/PAL AdvisorsProviding Skilled Market Sponsorship and Advice • DADs (Designated Advisor for Disclosure) sponsor U.S. companies on OTCQX. • PALs (Principal American Liaison) sponsor non-U.S. companies on International OTCQX. • Companies must be sponsored by a qualified investment bank, DR Bank (ADRS only) or attorney DAD/PAL to list on OTCQX. • The DAD/PAL role is modeled after the Nomads on the AIM market, but built to work within the U.S. framework. • OTCQX relies on the DAD/PAL community to sponsor credible and trustworthy companies while providing professional securities advice to the companies’ management. 11
  12. 12. OTC Market Segments Comparison OTCQX OTCQB FINRA BB Pink Qualitative listing standards NO NO NO Listing agreement NO NO NO Audited Current Disclosure NO Required SEC or US Banking NO NO Reporting Only Shells and distressed NO NO NO companies excluded FINRA regulated quotes Broker-dealer driven marketplace Electronic Marketplace NO Services for Issuers NO 12
  13. 13. Upcoming OTC Market Structure Changes in 2011• Access Fees• Limit Order Display• Market Order Protection• FINRA BB Closing Down• OTC Link Alternative Trading System (ATS) 13
  14. 14. Regulatory Changes – OTC LinkWe are registering our OTC Link - Interdealer Quotation Systemwith the SEC and FINRA to operate under Regulation ATS.•Anticipation of approval is end of Q1•There will be no changes from the perspective of the Subscribers to our products and services•Trading Services products will be provided by OTC Link ATS/BD•Subscribers will access the market place as they do now•The ATS is being created to act as a Regulated Interdealer Quotation System, not an ECN or Dark Pool 14