Can you please introduce penny OTC stocks please

Can we please have OTC stocks

The US execution partner does seem to have access to some OTC stocks and some some threads of OTC stocks were added to the Stock discussion topic, however there hasn’t been anything noted since, and the main thing to note is that the discussion stock threads were for companies with large market caps.

I suspect that penny stocks are going to be unlikely however for a couple of reasons. First off would be liquidity - due to the low numbers of trade and very small market caps most of these stocks tend to be very illiquid and would likely fall outside of Freetrades Order Execution Policy.

A second reason could be for… compliance reasons… The tiny market caps and general illiquidity of penny stocks on the OTC markets makes them highly susceptible to ‘pump and dump’ schemes. Free trading/investing services would likely get higher than average numbers involved in trading in these stocks due to the trading being free (or fx fee only at least). This could be seen by regulators as potentially encouraging ‘pump and dump’ schemes which would be illegal. This is one of the reasons why T212 have severely limited trading of penny stocks - there is a quite an interesting topic on their discussion board about it.

While there is a fair amount of speculation about the second part, I wouldn’t be surprised if it also applied to Freetrade as well.


Brilliant answer @JimmyJ

From the drive wealth website -

Trading in OTC securities may not be suitable for all investors. All investments involve risk, but OTC securities are among the riskiest and are not generally appropriate for individuals with a low risk tolerance. Potential risks may include, but are not limited to: lack of publicly available information, no minimum listing standards, lower liquidity, higher volatility, and business risk.

Thanks @JimmyJ that makes a lot of sense and was very informative!

With respect to the OP, this issue has been covered to death. A simple search should have brought you up to speed.