Crawford, that's all true, I agree with that. Here is a
Crawford, that's all true, I agree with that. Here is a fairly decent description from Seeking Alpha of the role market makers play :
The Pink Sheets — named for the color of paper the quotes were historically printed on prior to the electronic system — are secondary market sales of stocks that are available on the U. S. Over-the-Counter [OTC] market. "Market Makers" — the brokers who commit to buying and selling the securities of OTC issuers —use the Pink Sheets to publish bid and ask prices.
A company named Pink Sheets LLC, formerly known as the National Quotation Bureau, publishes the Pink Sheets in both hard copy and electronic format. Pink Sheets LLC is not registered with the SEC as a stock exchange, nor does the SEC regulate its activities.
"Pink Sheets are created by market makers who handle individual stocks. These market makers are people who specialize in one or more individual stocks and their purpose is to help the market remain fluid. They will buy and sell out of their own account, depending on what individual investors want or need. That's the way it's supposed to work."
"However," he adds, "this is one of the reasons why you have to be very careful when your broker places a market order - a market order can be anything the market maker wants it to be; whereas a limit order has very specific parameters. I use limit orders 99% of the time just for this reason - I don't want my client exposed to what a market maker thinks the market should be at that point in time. This is one reason why you don't want to be in a hurry buying companies on the Pink Sheets."
The fact that shares traded on Pink Sheets are unregulated makes some investors wary. And many Broker-Dealers steer unsophisticated investors away from them. In fact, under SEC regulations, brokers are not allowed to solicit the sale of the shares if they are under $5; they can only respond if asked about them.
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