OTC Market Makers - Nasdaq and OTC Markets
Chapters in this video
- 0:00 NYSE single DMM versus Nasdaq multiple market makers
- 1:21 Riley the Rep and the principal-only trap
- 2:32 Continuous quote obligations and minimum size rules
- 3:50 Climbing the OTC tiers: OTCQX, OTCQB, and OTC Pink
- 5:27 NYSE versus Nasdaq showdown and competition mechanics
- 6:54 Rapid-fire exam recap
What this video covers
- Why Nasdaq market makers are always principals (dealers), never agents, and how that differs from the NYSE DMM who can act in both capacities
- The four core obligations of Nasdaq market makers: continuous two-sided quotes, honoring quoted prices for minimum size, fair and orderly markets, and no inconsistent practices
- How minimum quotation size works inversely to price level, and why higher-priced securities require smaller share commitments
- The three OTC Markets Group tiers (OTCQX, OTCQB, and OTC Pink) and how disclosure standards decrease as risk increases
- Why penny stocks and bankrupt companies are banned from OTCQX regardless of disclosure quality
- The structural showdown between NYSE (one DMM, auction price discovery, agent/principal) and Nasdaq/OTC (multiple dealers, competing quotes, principal only)
- How competition among multiple market makers drives tighter spreads, and the penalty of withdrawal of quotation privileges for failing obligations
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