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OTC Markets Group, Inc. (OTCM) Hails New Era As OTCQX® And OTCQB® Conferred “Established Public Market” Status By SEC

|Includes: OTC Markets Group Inc.A (OTCM)

OTC Markets Group, which has helped to completely overhaul the OTC space with the OTCQX and OTCQB on their SEC-regulated OTC Link® ATS, has hailed the recent SEC decision to update their compliance and disclosure interpretations (May 16, see Question 139.13) with great pride, as the SEC finally starts to treat the "pinksheets" according to the new relevance paradigm created by the real-time technological proficiency of the burgeoning OTC Link.

This is the recognition well-earned for having done over a decade's worth of technology, transactional efficiency, transparency, and regulatory framework upgrades, implemented through OTC Link, which is now larger than the FINRA-controlled OTCBB. The SEC is basically saying with this move that, because FINRA is a registered SRO and regulates/oversees broker-dealers irrespective of the quotation system, and because OTC Link is now a more prominent and accurate real-time index of the market as a whole (applications go through FINRA and both BB/Link require a valid 15c2-11), the decision makes perfect sense, especially considering how 99% of OTCBB eligible securities are already quoted on OTC Link anyways.

This essentially puts OTCBB in the history books as the torch is passed to a new generation of real-time market transparency and OTCM is already chomping at the bit, eager to spend their clout earned by overhauling the space, with submission of a comment letter to the SEC urging expansion of the relevant Form 13(f) reporting requirements to encompass all equity securities across the entire spectrum of the OTCQX and OTCQB, as well as the OTC Pink marketplace. This move by the SEC is a clear decision to treat these marketplaces as "established public markets" and to take full advantage of their capacity to firmly establish a public market price in equity line financing security registration.

Today's traders know the score, there is no question which is the truly 21st century inter-dealer quotation/trading system out of the OTCBB and OTC Link. OTCM knows this and is moving to take the wheel, confident in their proven formula for creating intuitive, easy to interact with, and highly transparent markets. Previously, all three tiers of the OTC Link were looked down on as mere "pinksheets" by SEC personnel, but that era is clearly withering on the vine as the SEC sets a new standard, according OTCQX/OTCQB the proper significance.

This is great news for many companies who can now use their OTCQX or OTCQB marketplace designation to execute an equity line financing registration statement and are subsequently able to rely on quotes off the OTC Link ATS when establishing a public market price when as they go to raise capital. While the SEC essentially analyzes private equity line financings as indirect primary offerings, this move is a firm recognition of the prevailing demand for the 'resale' form of registration sought in such financings and will allow companies to register the 'resale' of the securities prior to exercise of the associated put if the transactions meet certain criteria (again, see Question 139.13), thus aligning the transaction more with the state of a primary offering. Basically, the differentiating factor here was the delayed nature of the puts and a lack of risk resulting from a (procedurally intangible) formula price, but the stated criteria and immediacy of the OTC Link ATS itself offers a powerful framework to justify the SEC modification.

OTC Link gives broker-dealers the power needed to control their trades and counterparties, resulting in highly optimized execution and improved order flow generation, all within a tight FINRA/SEC compliance envelope.

For more info on OTC Markets Group, Inc. visit

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