| The OTC market is vast and fragmented, encompassing over 8,600 stocks supported by 5,300 dealers that make a market in microcap securities. Thousands of investors actively invest in these securities, which account for $20 billion in trading volume a year. For decades the National Quotation Bureau (NQB) has collected information on domestic and foreign microcap securities, and listed them in pink and yellow colored books. Now the NQB has introduced the Electronic Quotation service (EQS) that provides electronic quotes to brokers, market makers and investors in real time.
Automation of the "pink sheets" market will help it enter into the formative stage of development of an established market. Automation will also help create the characteristics of an organized market including more transparency, higher liquidity, and greater efficiency. Besides the direct benefit gained in terms of increased efficiency, lower trading costs, and higher transparency, automation of the microcap market will also have the indirect benefit of increasing investor confidence in the market. This will drive more funds into the market and greater liquidity, thereby reducing spreads and making this a virtuous circle.
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