Sharesies provides access to a number of US over-the-counter (OTC) investments that have been reviewed and selected by DriveWealth, our clearing participant and sub-custodian in the US. When you place an order for these OTC investments, you authorise us to place your order with DriveWealth.
These investments are selected by DriveWealth based on their market capitalisation, liquidity, public ratings by securities analysts, and transparency of reporting requirements (audited financials, etc.). The OTC investments available will vary from time to time, and the inclusion of an investment should not be taken as an endorsement of it.
When buying or selling on OTC markets, there are a few additional things to be aware of:
OTC investments are not listed on a major exchange in the US and are traded via broker-dealer networks
All investments involve risk, but OTC investments are among the riskiest investments and are generally not suitable for individuals with a lower risk tolerance
You’ll be charged the same fees as buying or selling listed investments on Sharesies
OTC markets are open at the same time as the key US exchanges (9:30 AM to 4 PM Eastern Daylight Time, Monday to Friday)
Prices shown in the Sharesies app are the prior trading day’s closing price, and are in USD
Orders may not fill as quickly, and will only stay on market until the end of the trading day (4 PM EDT)
Some investments are not available to buy and sell via Sharesies. Generally, this will be because they’ve been classified as an Expert Market security—email help@sharesies.co.nz to sell these investments
Generally, limit orders, stop loss orders, and market orders are available on OTC markets. Some OTC investments that are in a sell-only state, limit orders, and stop loss orders won’t be available.
Risks of US OTC investments
OTC investments may not be suitable for all investors. All investments involve risk, but OTC investments are among the riskiest investments and are generally not appropriate for individuals with a lower risk tolerance. Potential risks may include (but are not limited to):
Lack of publicly available information: Most large US public companies file reports with the SEC (U.S. Securities Exchange Commission) that any investor can get for free from the SEC's website. Professional investment analysts regularly research and write about larger public companies, and it's easy to find their share prices. In contrast, information about OTC investments can be extremely difficult to find, making them more vulnerable to investment fraud schemes and making it less likely that quoted share prices in the market will be based on full and complete information about the company.
No minimum listing standards: Companies that trade their shares on exchanges must meet minimum listing standards. For example, they must have minimum amounts of net assets and minimum numbers of shareholders. In contrast, companies available on OTC markets often don’t have to meet any minimum standards.
Lower liquidity: Generally, the more demand for an investment, the greater the liquidity. Liquidity makes it easier for investors to buy or sell investments and receive a competitive price for their shares. OTC investments may be illiquid and infrequently traded, which may mean that they’re more difficult to sell and price accurately.
Higher volatility: OTC investments may experience greater price fluctuations and wider spreads due to lack of liquidity and other factors. An order in an OTC investment may not execute or may execute at a substantially different price.
Business risk: Many OTC investment companies are new and have no proven track record. Some of these companies have no assets, operations, or revenues. Others have products and services that are still in development or have yet to be tested in the market.