Understand the difference between going public and OTC in one article! A complete guide to OTC, US stocks, and Taiwan stocks

Want to invest in stocks but feeling dizzy from the complexities of listing, OTC, and emerging markets? This article will unveil the mysteries behind these concepts, from basic definitions to practical operations, helping you become an experienced investor in one stop.

Understand the Fundamental Differences of the Three Major Markets

What is Listing?

Listing means a company is officially traded on a securities exchange. For example, in Taiwan, companies are listed on the “Taiwan Stock Exchange” (TWSE); in the US, the main exchanges are the New York Stock Exchange (NYSE) and NASDAQ.

Core features of listing:

• Strict Regulation: The Securities and Exchange Commission (SEC) enforces rigorous standards for applicant companies to protect investors
• Continuous Disclosure: Listed companies must publish quarterly financial data; failure to comply may result in delisting
• Company Size: Usually mature, large enterprises like TSMC, MediaTek, etc.

Trading characteristics of listed stocks:

• High trading volume and liquidity, easy to buy or sell
• Relatively moderate volatility and controllable risk
• Best suited for beginners and conservative investors

What is OTC?

The OTC trading platform is the “OTC Market” (TPEx). Unlike listing on an exchange, OTC trading involves broker-dealers holding inventories for trading. This market offers a wider variety of financial products, including stocks, bonds, forex, cryptocurrencies, and derivatives.

OTC investment traits:

• Looser application criteria, higher growth potential, diverse themes
• Larger fluctuations, but also more growth opportunities
• Moderate trading volume, liquidity slightly lower than listed stocks
• Suitable for risk-tolerant investors seeking growth stocks

What is Emerging Stock Board (興櫃)?

Emerging Stock Board (興櫃) is a transitional platform for companies that do not yet meet OTC standards but wish to raise funds publicly and build market recognition. Typical companies include startups, biotech/medical device firms, R&D companies, or teams with promising themes.

Risks of emerging stocks:

• No price fluctuation limits, prices can be extremely volatile
• Very low trading volume, poor liquidity, may face unfilled orders
• Limited transparency, financial disclosures are far less comprehensive than listed or OTC stocks
• Opportunities and risks are proportional; strongly discouraged for beginners

Comparison Table of Listing, OTC, and Emerging Markets

Application Conditions for Listing and OTC in Different Regions

Taiwan Stock Listing Conditions

To be listed on the Taiwan Stock Exchange, companies must meet:

1. Company Age: Registered for at least 3 years under the Company Act
2. Paid-in Capital: Over NT$600 million
3. Profitability (any one of the following):
   • Pre-tax profit in the last two fiscal years accounts for at least 6% of share capital each year
   • Average over two years exceeds 6%, with improved profitability in the most recent year
   • Achieved over 3% in each of the last five fiscal years
4. Shareholders: At least 500 registered shareholders (excluding insiders and legal entities holding over 50%), holding at least 20% of shares or 10 million shares in total

Taiwan OTC Conditions

The OTC application requirements are relatively lenient:

1. Company Age: Registered for at least 2 full fiscal years
2. Paid-in Capital: Over NT$50 million
3. Profitability (any one of the following):
   • Last year’s pre-tax profit exceeds 4% of share capital, with no accumulated losses
   • Two consecutive years each over 3%
   • Two-year average over 3%, with the latest year better than the previous; last year’s pre-tax profit at least NT$4 million
4. Shareholders: At least 300 registered shareholders (excluding insiders and legal entities holding over 50%), holding over 20% or more than 10 million shares

US Stock Listing Conditions

US listing and OTC application methods differ greatly. NYSE (New York Stock Exchange) has the highest requirements, while NASDAQ has three tiers to accommodate more companies:

NYSE Main Requirements:

• Minimum 5,000 shareholders
• Minimum public float: 2.5 million shares
• Public float market value: US$100 million
• Minimum offering price: US$4
• Shareholders’ equity: US$15 million

NASDAQ Global Market:

• Minimum 450 shareholders
• Minimum public float: 1.25 million shares
• Public float market value: US$45 million
• Shareholders’ equity: US$30 million
• Pre-tax earnings over the past 3 years total at least US$11 million, with at least US$2.2 million in each of the last two years

NASDAQ Capital Market:

• Minimum 300 shareholders
• Minimum public float: 1 million shares
• Public float market value: US$15 million
• Shareholders’ equity: US$5–4 million (depending on standards)
• Allows unprofitable companies with 2-year operating history

US OTC Market Conditions

US OTC applications are much more relaxed. Whether for OTCQX (best market) or OTCQB (venture market), companies only need to submit relevant documents and ensure their stock price remains above US$0.01 over the last 30 trading days. Pink Market (PINK) is even simpler, requiring only a form submission to FINRA.

The Three Tiers of the US OTC Market

OTCQX (Best Market)

The most regulated OTC platform. Ineligible are penny stocks, shell companies, or bankrupt firms. Companies must report financials to the SEC, including some already listed abroad or planning to list on NYSE or NASDAQ.

OTCQB (Venture Market)

Intermediate tier between listing and Pink Market. Focuses on early and developing companies. No minimum financial standards (allowing low-priced stocks and shells), but bankrupt companies are excluded. Companies must provide annual financial reports compliant with accounting standards.

PINK (Pink Market)

The loosest OTC market. Companies can list without any requirements, just submitting a form to FINRA. The market is a mix of legitimate and speculative companies, with no financial disclosures or SEC registration needed. Due to the very low threshold, Pink Market stocks carry the highest risk. The protagonist in the movie “The Wolf of Wall Street” was trading Pink Market stocks.

How to Buy Listed, OTC, and Emerging Stocks?

Trading Listed Stocks

Taiwan Listed Stocks: Open a securities account with a Taiwanese broker to trade

US Listed Stocks:

• Open an overseas broker account or use a nominee account
• Trading hours are 9:30–16:00 ET, Monday to Friday
• Be mindful of time differences:
  • Daylight Saving (Mar–Nov): Taiwan time 21:30–4:00
  • Standard Time (Nov–Mar): Taiwan time 22:30–5:00
• US markets are closed on holidays

Suitable for: beginners, conservative investors, fans of blue-chip stocks, long-term investors

OTC Stocks Trading

Taiwan OTC: Place orders through a securities broker and sign an account agreement

US OTC: Most overseas brokers support OTC trading; open an account and trade

Suitable for: investors with basic market knowledge, moderate risk tolerance, interested in growth or thematic stocks for short-term trading

Emerging Stock Trading

Most difficult to operate. Investors must confirm their broker supports “Emerging Stock” trading and activate this feature online or in person. Due to high risk, signing a risk warning form is required.

Special restrictions:

• Only “spot stocks” orders; no margin, short selling, or day trading
• Must trade in whole lots (1,000 shares)
• Negotiated trading, not automatic matching; slower execution, larger price jumps
• No price fluctuation limits, low liquidity

Suitable for: high risk-tolerant investors; those familiar with individual stocks and able to judge authenticity; small capital investors willing to endure extreme volatility; momentum traders

Pros and Cons of Investing in Listed vs. OTC Stocks

Listed Stocks

Advantages:

• High return potential: Data shows the S&P 500’s average annual return over nearly 30 years is about 10%, far exceeding bonds at 5%
• Dividend income: Many listed companies pay quarterly dividends, creating passive income
• Hedge against inflation: Stock returns generally outperform inflation; the S&P 500 and Dow Jones have roughly 10% and 8.7% returns over 30 years

Risks:

• Market volatility: Short-term losses exceeding 10% are common
• High research costs: Requires time to learn fundamentals and technical analysis, and to stay updated on holdings

OTC Stocks

Advantages:

• Broader investment options: Many overseas companies are OTC-listed, providing more choices
• Lower entry cost: Stocks are cheaper; for example, a $1 stock rising to $1.50 yields 50% return

Risks:

• Limited regulation: Less disclosure, some markets even lack data, making them highly speculative and risky
• Low trading volume: May face no bids, leading to failed trades, delays, or wider bid-ask spreads
• High volatility sensitivity: React strongly to macroeconomic data releases, with large swings during announcements

Three Starter Tips for Beginners

Assess Your Financial Situation

First, clearly calculate how much capital you can invest. Understand your income, living expenses, debts, and savings to accurately assess your investment capacity. Stock investing is about value appreciation, not quick riches; never invest all your assets in the stock market.

Do Your Homework and Research

Mastering basic stock investment knowledge is crucial. Read financial reports and industry analyst reports. These processed information sources are easier to digest and help you make accurate judgments.

Set Clear Goals

Successful investing requires goals. Set monthly and yearly financial targets and stick to your investment plan. With clear goals, you won’t be swayed by daily news or short-term fluctuations, enabling more rational market responses.

Investment Tip: Since OTC stocks carry higher risks and are more complex, beginners should start with listed stocks, build experience, then gradually explore OTC markets. The difference between listing and OTC is not only regulation but also risk and reward trade-offs. Choose a market aligned with your risk tolerance—this is the key to long-term success.