Stake Academy - OTC Stocks
The Grayscale Bitcoin ETF, Tencent and Porsche are just a few names now available as part of Stake's OTC offering. Find out more on how these non-exchange listed stocks work and how to get access.
What are OTC stocks?
Packed with multi-billion dollar global companies like Adidas and Nintendo, over the counter (OTC) stocks bypass the major US exchanges. Now, they are available to the Stake community.
Before going into the nitty-gritty mechanics of the stocks, how broad is the OTC offering? Stake has close to 100 new OTC stocks on the platform. Here’s the full list:
Grayscale Bitcoin Trust
Grayscale Ethereum Trust (ETH)
Roche Holding Ltd Sponsored ADRs
Lightwave Logic Inc.
Alpine 4 Technologies Ltd. Class A
Danone SA ADRs
Grayscale Ethereum Classic Trust
BNP Paribas SA Sponsored ADRs
Anglo American plc Sponsored ADRs
TESCO PLC S/ADR NEW
Impala Platinum Holdings Limited Sponsored ADRs
Deutsche Telekom AG Sponsored ADRs
Kingfisher Plc Sponsored ADRs
Akzo Nobel N.V. Sponsored ADRs
AXA SA Sponsored ADRs
BASF SE Sponsored ADRs
Imperial Brands PLC Sponsored ADRs
JBS S.A. Sponsored ADRs
Infineon Technologies AG Sponsored ADRs
Grayscale Digital Large Cap Fund LLC
Experian PLC Sponsored ADRs
Grayscale Bitcoin Cash Trust BCH
Royal Ahold Delhaize N.V. Sponsored ADRs
Zurich Insurance Group Ltd Sponsored ADRs
Wal-Mart de Mexico SAB de CV Sponsored ADRs Class V
adidas AG Sponsored ADRs
Deutsche Lufthansa AG Sponsored ADRs
Norsk Hydro ASA Sponsored ADRs
Repsol SA Sponsored ADRs
Fortescue Metals Group Ltd Sponsored ADRs
J Sainsbury Plc Sponsored ADRs
Koninklijke DSM N.V. Sponsored ADRs
Grayscale Litecoin TR LTC
Heineken NV Sponsored ADRs
Tencent Holdings Ltd. Unsponsored ADRs
LVMH Moet Hennessy Louis Vuitton SE Unsponsored ADRs
China Construction Bank Corporation Unsponsored ADRs Class H
Prosus Nv Sponsored ADRs
AIA Group Limited Sponsored ADRs
Siemens AG Sponsored ADRs
Softbank Grp Unsp/Adrs
Industria de Diseno Textil Inditex SA Unsp/Adrs
Airbus SE Unsponsored ADRs
Allianz Se Unsp/Adrs
Nippon Telegraph and Telephone Corporation Sponsored ADRs
Volkswagen AG Unsponsored ADRs
Enel SpA Unsponsored ADRs
Naspers Limited Sponsored ADRs Class N
Schneider Elec Unsp/Adrs
Recruit Holdings Co Adrs
Iberdrola SA Sponsored ADRs
NINTENDO CO LTD Unsponsored ADRs
Adyen N.V Unponsored ADRs
Ping An Insurance (Group) Company of China Ltd. Sponsored ADRs Class H
Kddi Corp Unsp/Adrs
Shin-Etsu Chem Unsp/Adrs
Reckitt Benckiser Group plc Sponsored ADRs
Bayer AG Sponsored ADRs
Glencore Plc Unsp/Adrs
London Stock Exchange Group plc Sponsored ADRs
Daikin Industries Ltd Unsp/Adrs
Intesa Sanpaolo S.p.A. Sponsored ADRs
Lonza Group Ag Unsp/Adrs
Fanuc Corporation Unsponsored ADRs
Nordea Bank Abp Sponsored ADRs
Compass Group Plc Sponsored ADRs
Vestas Wind Sys Unsp/Adrs
ENGIE SA Sponsored ADRs
Deutsche Boerse AG Unsponsored ADRs
Coloplast A/S Sponsored ADRs
BYD Company Limited Unsponsored ADRs
Continental AG Sponsored ADRs
CK Hutchison Holdings Unsp/Adrs
Bank of China Limited Unsponsored ADRs Class H
Kao Corp Unsp/Adrs
Panasonic Corp S/Adrs
Legrand Sa Unsp/Adrs
Michelin Cie Gen Unsp/Adrs
A.P Moller-Mrs Uns/Adrs
Unicredito Spa Unsp/Adrs
Societe Generale S.A. Sponsored ADRs
Komatsu Ltd. Sponsored ADRs
BAE Systems plc Sponsored ADRs
Svenska Handelsbanken AB Uns/Adrs
Nissan Motor Co Ltd Sponsored ADRs
Banco do Brasil S.A. Sponsored ADRs
Porsche Autombl Unsp/Adrs
Royal KPN NV Sponsored ADRs
International Consolidated Airlines Group SA Sponsored ADRs
Ubisoft Entertainment SA Unsponsored ADRs
Au Optronics Corp Adrs
Lojas Renner SA Sponsored ADRs
Compagnie Financière Richemont SA Un/Adrs
Solarwindow Tech Inc
Two major questions arise surrounding OTC stocks.
The obvious question. Without an exchange, how do these shares change hands? Such shares are traded through broker-dealer networks. Using an electronic network, scores of broker-dealers are posting stocks on offer. Trades are executed directly between the buyer and seller without the need for a 3rd party exchange to settle transactions.
A company called OTC Group runs such networks. Three marketplaces exist. Each OTC stock belongs to one of the following categories.
Best Market (OTCQX): The most stringent report requirements, such companies are generally multi-billion-dollar foreign companies that may have plans to eventually list on US markets. The majority of OTC stocks fall into the OTCQX category on Stake despite the fact only 4% of OTC stocks are in this tier. Stocks under US$5 in price are also ineligible for OTCQX trading.
Venture Market (OTCQB): The middle tier, these companies tend to be early-stage or developing.
Pink Sheets: Such companies have no US reporting requirements and don’t have to report to the SEC. While pink sheets may have a bad image, big names like Nintendo fit into the category. While the US regulators may not monitor such stocks, foreign regulators may. Stake only offers access to the highest quality pink sheet stock.
Next, why would a company go OTC rather than on an exchange? In short, listing on an exchange is difficult and costly. For smaller companies, the millions needed to both list then comply with the yearly SEC and FINRA audits prices them out of the major exchanges.
For bigger companies, like the OTC stocks found on Stake, they are generally foreign ADRs. These companies are already listed on a local market and an OTC listing provides an easier option for foreign investors to access the stock. Or in the case of the Greyscale crypto ETFs, the SEC is yet to approve an ETF with crypto as the underlying asset. Such instruments make use of the OTC markets to avoid the SEC’s regulatory conditions.
A few things to consider
It’s important to recognise that OTC stocks tend to have lower liquidity. Entering and exiting positions may be more difficult if traders are looking to execute at specific prices. Lower liquidity is also associated with increased volatility.
Pay careful attention when placing orders to ensure you execute at your desired price. Read our Stake Academy on Order Types to understand how to best leverage market, limit and stop orders to execute trades.
Moreover, while the stocks available on Stake are high-quality OTC stocks, generally such stocks are subject to less regulation than their exchange-listed counterparts. Naturally, this leads to more risk.
How do I trade OTC stocks?