What are Pink Sheets?

The term “pink sheets” historically refers to stocks that are traded over-the-counter (OTC) rather than on established U.S. stock exchanges such as the New York Stock Exchange (NYSE). These stocks represent companies that either cannot meet or choose not to comply with the listing requirements of these major exchanges. Reasons for this might include their small size, being based outside the U.S., or a reluctance to undertake the rigorous and costly process of filing with the Securities and Exchange Commission (SEC).

The term”pink sheets” originated from the distinctive pink-colored paper on which these stocks’ quotes were once printed. Although predominantly viewed as high-risk and speculative, these securities have seen an increase in regulatory oversight over time. The terminology surrounding them has also evolved: in 2008, the pink sheets were officially renamed Pink OTC Markets, and in 2011, this was further changed to OTC Markets Group. Despite these official changes, the term “pink sheets” is still commonly used in the financial industry to refer to these types of stocks. This colloquial usage persists as a nod to their historical roots and distinctive trading characteristics.

Understanding the Pink Open Markets

The “Pink” designation in the finance world originated from the pink paper used for printing stock price quotes. Although trading is now digital, “pink” still refers to certain over-the-counter (OTC) stocks in conversations.

OTC markets, unlike major exchanges, operate through a decentralized network of dealers holding securities to manage trades. These securities are primarily traded on Alternative Trading Systems (ATSs), with two key interdealer systems: the NYSE Group’s Global OTC ATS and OTC Markets’ OTC Link ATS.

The OTC Markets Group oversees three key OTC trading venues: OTCQX, OTCQB, and the Pink market. Each marketplace has different financial standards and regulatory scrutiny levels. The Pink market, known for being highly speculative, is the least regulated with minimal financial standards, making it an open market for trading OTC stocks.