Something a friend sent me re: Pink Sheets.
(Almost looks like Pinks could be about the same as OTC's after years end when so many little companies will be delegated to them.)
Pink Sheets Are Taking
Obscure Shares to Web
By TERZAH EWING
Staff Reporter of THE WALL STREET JOURNAL
One of the cobweb corners of the U.S. stock-trading world is finally getting wired: The Pink Sheets, of all things, are going online.
With roots back to the early 1900s, the Pink Sheets have for decades been the home of the market's most obscure and infrequently traded stocks. The printed listings of thousands of stocks, many of them too small to get a listing on the Nasdaq Stock Market or the exchanges, got their name because of the color of paper on which the stock prices are printed.
Join the Discussion: Do you think the listing of Pink Sheet stocks online will make them more attractive to investors?
The listings are Wall Street's equivalent of transistor radios in the Web-TV age. But starting as early as Friday, stock quotations for Pink Sheets issues will be posted at www.otcquote.com, a subscribers-only Web site.
The closely held New York-based National Quotation Bureau, which puts out the Pink Sheets listings, created a screen -- in bright pink, naturally -- that will give subscribers quotes, market-maker phone numbers and other stock information for these over-the-counter issues.
Traders still won't be able to buy and sell the approximately 3,600 Pink Sheet stocks without a phone call; online execution isn't in the cards for the system. But up-to-the-second prices are a step forward for the Pink Sheets, whose stocks have a reputation for opaque prices and thus manipulation and other dangers to investors.
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In the Pink -- and on the Web After nearly 90 years, the Pink Sheets of over-the-counter stock listings are going online.
The National Quotation Bureau (NQB) was founded in 1913.
3,600 stocks, both tiny companies and large foreign concerns, are quoted in the Pink Sheets and 2,500 high-yield and convertible bonds in the Yellow Sheets.
Over the next year, 2,000-3,000 stocks should be added from Over-the-Counter Bulletin Board delistings.
Some current Pink Sheet stocks
Company (symbol) Company (symbol)
AFA Protective (AFAP) Sega Enterprises (SEGNY)
Adrian Steel (ADST) Nestle ADRs (NSRGY)
Ash Grove Cement (ASHGE) Rolls Royce ADRs (RYCEY)
Cyberguard (CYBG) Volkswagen ADRs (VLKAY)
Syquest Technology (SYQTQ) Cifra ADRs (CFRVY)
Kohler Cos. (KHCO)
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And for small-stock investors, any wider dissemination of prices is probably good news. While most small investors should tread carefully in any tiny stock, the online stock quotes will at least make it clearer where these fitfully traded shares stand.
Currently, Pink Sheet quotes are compiled and bound in a book sent out to traders, brokers and some investors just once a week. Those quotes, which are used as indications and aren't binding, are refreshed just once a day via fax, meaning market-makers have to call around just to find current prices, then make still another call to trade.
Among the biggest beneficiaries of the new service will be institutional, or "wholesale" stock-trading firms, which often are the only market-makers in stocks listed on the Pink Sheets (as well as on the National Association of Securities Dealers' Over-The-Counter Bulletin Board, also a traditional home for obscure and illiquid stocks that aren't listed on the NASD's Nasdaq Stock Market itself).
Len Mayer, president of wholesale firm Mayer & Schweitzer, a unit of Charles Schwab Corp., explains that under the current system, anyone who wishes to trade a Pink Sheet stock is required to call and ask for quotes from at least three of the market-makers listed in the weekly publication.
That process is cumbersome, he says, particularly when there is a surge in interest in certain Pink Sheet stocks. When investors began snapping up Internet-related stocks in the first quarter, for example, he says Pink Sheet orders backed up, "and people may have missed markets because it took some period of time to get them executed."
Moreover, he says, a trader may make the requisite three calls to round up quotes and still miss the best bid or offer because he doesn't make the fourth, fifth or sixth call. "In an electronic environment you could view all the market-maker quotes" at once, he adds. "In the end, you should only have to call one market maker: the one with the best bid or lowest offer."
Why did it take so long for this corner of Wall Street to make it into the modern age? After all, most traders have worked for years at desks laden with computer terminals. Even the NASD's OTC Bulletin Board offers real-time electronic quotes for its stocks, though traders of those stocks also must execute by phone.
Several circumstances conspired to hold the Pink Sheets back.
The Pink Sheets weren't always a technology backwater. The National Quotation Bureau was formed in 1913, just ahead of the 1920s bull market and the 1929 stock-market crash, through the merger of two of the first companies to offer centralized quote publishing.
But between 1963 and 1994, the National Quotation Bureau was owned by Commerce Clearing House, a publisher of reference books that wasn't interested in keeping up with new markets technology, according to the National Quotation Bureau's Web site.
That paved the way for the NASD's Nasdaq, which began in the 1970s as a computerized real-time stock-quote provider, to supplant the Pink Sheets' traditional function for most stocks. But as Nasdaq grew into a de facto stock exchange, listing large liquid issues such as Intel and Microsoft, its over-the-counter function diminished.
In 1997, new owners led by Cromwell Coulson, himself a former trader of over-the-counter stocks, took over the National Quotation Bureau. The 33-year-old Mr. Coulson says market-makers, recognizing that the OTC markets were growing more competitive, began asking for more transparent Pink Sheets to enable them to offer their customers best execution on trades.
Another push came in January of this year, when the Securities and Exchange Commission approved a new NASD rule that requires companies wishing to list on the OTC Bulletin Board to submit current financial reports to the SEC or to insurance or banking regulators.
NASD officials began combing through current Bulletin Board companies this summer to determine whether they remain eligible. Adena Friedman, director of trading and market services at the NASD, estimates that by the time that process is finished next summer, 55% to 65% of the Bulletin Board's 6,700 companies will be delisted.
Between 2,000 and 3,000 of those firms likely will move to the Pink Sheets, Mr. Coulson of NQB estimates, doubling the number of issues listed there and making the need for transparency even more urgent. "The over-the-counter market is really competitive," he says. "You need it to be transparent."
And the old paper books of Pink Sheets? They will still be around. But, starting in October, they will be published monthly instead of weekly.
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Note: Thanks, Mike! |
