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OTC Markets Blog

Latest commentary on Market Structure, Compliance, Small Cap and Reg A+ issues, including insights on the news and trends that affect the public markets.

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Data

Blue Sky Recognition Continues to Gain Traction

OTC Markets Group Garners Blue Sky Exemptions in 35 States

Since May 2016, we have fostered an active dialogue with constituents at the North American Securities Administrators Association (NASAA) and individual state regulators with the goal of providing investors, companies, brokers and other market participants with a defined regulatory structure that recognizes the transparent current disclosure provided by OTCQX and OTCQB companies.  We appreciate the hard work and diligence of NASAA members as we work to achieve important exemptions for our OTCQX and OTCQB markets under state Blue Sky laws governing secondary trading. Continue reading “Blue Sky Recognition Continues to Gain Traction”

CECL: Unpaved Road Ahead

The Genesis/Birth of CECL

After the 2008 financial crisis, much of the focus on the regulation of financial institutions shifted to mitigating systemic risk. This included an increased focus on stress testing and the recapitalization of institutions—both intended to help ensure solvency and insulate the global economy from further erosion. Continue reading “CECL: Unpaved Road Ahead”

Three Principles for Thriving Public Markets

Oscar Wilde once wrote that “Everything popular is wrong.” He was describing our natural tendency to find comfort with well-established people and widespread ideas. Regulators, faced with the opportunity to open markets to alternative choices, hear a chorus of respected voices resistant to change. The SEC took until the year 2000 to repeal Rule 390—the rule that gave the New York Stock Exchange a monopoly in trading Blue Chip securities. The principles of open, transparent and connected public markets prevailed.

We raise this as the old idea underlying Rule 390, centralization of trading, is now being pushed as a popular fix for small company liquidity and capital formation.   Of course, individual traders are determined to make trades in many different places, which means government intervention would be required to force stock trading back onto the largest stock exchanges[1]. Rent-seeking regulations are often cloaked in the language of “reform” and the public good.

Continue reading “Three Principles for Thriving Public Markets”

Understanding Short Sale Activity

Quality data is essential to well-functioning markets. Improving the availability, relevance and usefulness of data aligns with OTC Market Group’s mission to create better informed, more efficient financial markets.  In our experience, short selling remains one of the most highly-debated topics among academics, companies, investors, market makers and broker-dealers. As a market operator and company CEO, I believe it’s critical to address the misconceptions that still exist around short sale data and the correlation to a stock’s fundamental value.

Short selling, the sale of a security that the seller does not own, has long been a controversial practice in public markets.  Advocates for short selling believe it builds price efficiency, enhances liquidity and helps improve the public markets, while critics are concerned that it can facilitate illegal market manipulation and is detrimental to investors and public companies.  Given the diverse range of opinions and opposing views, we believe the first step is to take a deeper dive into the data and help separate out the noise.

Continue reading “Understanding Short Sale Activity”

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