Other instruments
OTC Bulletin Board
Over-The-Counter Bulletin Board is a network of a number of market makers exposing current bids, offers and trades that have ended to a centralized processor. The OTC Bulletin Board is not part of the NASDAQ stock exchange where the later has no power over the OTCBB. However, OTCBB stocks are eligible to be traded through NASDAQ data feeds and behave in both cases the same.
OTCBB and NASDAQ’s bids/ask technology could be considered as indistinguishable but there is important difference. The difference is that OTCBB stocks are ensured by market makers and with NASDAQ stocks are developed by the exchange. In terms of OTCBB stocks, the two parties are brought together by the board and from there on, the market makers put together the trades.
Pink Sheet Stocks
Pink Sheet Stocks is another computerized OTC market controlled by an organisation called Pink Sheets LLC. Just as the OTCBB stocks, Pink Sheet Stocks are only provided by market makers. However, there are differences associated with Pink Sheet Stocks. There are no size or registration restrictions for a stock to be traded on the Pink Sheets and are also included on the exchanges. The greater difference is that Pink Sheet companies are not obliged to give out disclosure of their financial results and details regarding material.
For this reason a lot of companies are looking to move from the Pink Sheets to other suppliers such as OTCBB or NASDAQ exchanges. In order to prevent this, the Pink Sheets companies willingly give out quarterly and annual results. The objective is to build reliability with the market. We advise investors to research the stock providers before they conclude, as there are Pink Sheet companies that work with full disclosure.
Treasury Bills (T-Bills)
“Treasury Bills are government dept with less than one year’s original maturity (typically 1-6 months).” (Peter Stanyer (2006), Investment Strategy: How to Understand Markets, Risk, Rewards and Behaviour, The Economist Newspaper Ltd.)
The treasury bills are actually short term securities that mature in less than a year from their production date. In addition, an investor buys T-Bills for a lower price than their par value and as soon as these bills turn mature, Treasury pays their par value. The interest the investor receives is the difference between the price of the security when it was purchased and the difference in price when it matures.
Let’s assume that an investor bought a $20.000, 6 month Treasury bill for $19.500 and held it until the stock turned mature. The interest the investor would receive would be $5.000.
