Penny Stocks Market

Penny Stocks Market

Penny socks are low priced stocks generally traded in over the counter market. Most of the stocks are available in a penny that’s why these are known as penny stocks. These are also known as micro cap. These low priced stocks are highly risky due to various reasons including limited liquidity of these stocks. These stocks are generally traded in over the counter market, however these can also be traded in other exchanges.

As per the Securities and Exchange Commission, penny stocks are priced below $5.0 mark and may be listed at the NASD OTC Bulletin Board or pink sheets. The penny stocks are generally offered by a company having less than 3 years in business and have less than $5 million net tangible assets or a company has at least 3 years in business and has under $2 million net tangible assts or a company has $6 million revenue for 3 years.

Over The Counter Bulletin Board: OTCBB (Over the counter bulletin board) provides complete information for more than 3000 stocks including real time quotes display, last sale price and volumes. These equities are generally not traded in any national stock exchanges. The OTCBB electronically provide real time quote for domestic as well as foreign stocks and ADRs and also displays previous days trading activity in DPPs. More than 200 market makers are registered at the OTCBB.

Pink Sheets: Pink sheets is published and maintained by Pink Sheets LLC and it displays bid and asked quotation prices of different penny stocks. Companies listed in pink sheets are most risky as most of the companies easily meet the minimum requirement for listing.

Penny stocks at pink sheets are thinly traded. Many companies pay traders for selling these penny stocks and thus brokers uses all fraudulent activities to sell the shares and evade money from people.

Market Makers: In some of the cases, only a few market makers are actively involved in a specific penny stocks and buy and sell these specific securities only. Dealing with a market maker is preferable, as the market maker not only sells the specific stocks but it also buys the stocks. Around 230 market makers are approved by the OTCBB and these market makers buy and sell stocks on regular basis.

It is also preferable to see that more number of market makers is available for specific stocks. Lower number of market makers can influence or manipulate the specific stocks. In such a case the investment in the specific penny stock is risky as these few market makers can control the prices of the stocks and thus can keep a wide gap between the sale and buying prices of the stock. In recent past some of the market makers were found to involve in the fraudulent activities.

Penny stocks are low priced shares generally traded at over the counter market. Over the counter bulletin boards (OTCBB) and pink sheets are common over the counter market and OTCBB is governed by the rules and regulations of the Securities and Exchange Commission of United States.

Penny Stocks Market