A Complete Guide to Listing, OTC, and Emerging Markets | Stock Investment Beginner's Guide

Want to invest in stocks but get confused by “Listed,” “OTC,” and “Emerging Stock Board”? Don’t worry, this article will guide you to understand the fundamental differences among these three stock classifications and how to choose suitable investment targets based on your risk tolerance.

Three Layers of the Stock Market: From Most Stable to Most Volatile

What is a listed stock?

Listing refers to a company’s registration and listing on an officially recognized stock exchange. In Taiwan, this platform is the “Taiwan Stock Exchange (TWSE)”; in the United States, the major exchanges are the New York Stock Exchange (NYSE) and NASDAQ.

Listing is the highest platform for corporate financing. To reach this stage, companies must pass multiple reviews—covering operational years, profitability, shareholder count, and more, each with clear thresholds. Due to the difficulty of entry, listed companies are usually industry leaders: TSMC, Delta Electronics, MediaTek, and other top enterprises are typical examples.

Features of listed stocks are obvious: high trading volume, strong liquidity, and relatively moderate volatility. This means you can buy or sell quickly without worrying about finding a trading partner.

Suitable for: Stock market beginners, conservative investors, long-term holders, and those who prefer a stable investment that allows peaceful sleep.

What is an OTC stock?

OTC trading platform is the “Taiwan OTC Exchange (TPEx)”. Its operational logic is quite different from listed stocks. Listing on the exchange involves centralized matching, while OTC trading is conducted through broker-dealers holding stock inventories for point-to-point transactions.

This market has relatively relaxed regulations, attracting many growth-oriented and mid-sized companies. Besides stocks, OTC also trades bonds, foreign exchange, cryptocurrencies, derivatives, and other asset classes, making the ecosystem richer.

OTC stocks tend to be more volatile than listed stocks, but this “uncertainty” creates opportunities for investors. Growth stocks, thematic stocks, and small-cap stocks often see remarkable gains here.

Suitable for: Intermediate investors with some experience, those willing to accept moderate risk, growth-seeking investors.

What is an Emerging Stock Board?

Emerging Stock Board (興櫃) is a transitional stage for companies that haven’t yet met OTC standards but are eager to raise funds publicly and build market recognition. Startups, biotech and medical device firms, small and medium enterprises, and newly established teams with promising themes are common here.

Emerging stocks are the highest risk among the three. No price fluctuation limits mean stock prices can skyrocket or crash within a day; low trading volume and poor liquidity may leave you with a situation of “no one to buy or sell”; least transparent information means you need to discern truth from falsehood yourself.

Suitable for: High-risk takers, experienced stock researchers, short-term traders, and investors with small capital who can endure extreme volatility. Absolutely not suitable for beginners.

In-depth Analysis of OTC Conditions | The “Entry Ticket”

Conditions for OTC listing in Taiwan

What requirements must a company meet to be OTC-listed in Taiwan?

Basic threshold: The company must be registered under the Company Act for at least two full fiscal years, with paid-in capital exceeding NT$50 million. This standard is much more lenient than the NT$600 million required for listing, reflecting OTC’s positioning as a “mid-tier market.”

Profitability: This is a key OTC condition. The company’s pre-tax net profit to equity ratio must meet one of the following—over 4% in the most recent year with no accumulated losses; or over 3% for two consecutive years; or an average over 3% in the last two years with better recent profitability. Additionally, pre-tax net profit in the latest fiscal year must not be less than NT$4 million.

Shareholder dispersion: Besides insiders and legal entities holding over 50%, there must be at least 300 other registered shareholders, and these shareholders’ holdings should account for over 20% of total shares or more than 10 million shares. This ensures market liquidity and democratic participation.

Why are OTC conditions relatively lenient? Because OTC aims to support small and medium enterprises and emerging industries. It is a growth accelerator, not a final destination. Many companies eventually upgrade to listing after a few years on OTC.

US OTC Market Application

The US OTC market consists of three tiers: OTCQX (Best Market), OTCQB (Venture Market), and PINK (Pink Market).

OTCQX (Best Market) is the most regulated OTC tier, excluding penny stocks and shell companies. Companies must report financials to the SEC and disclose information. It hosts foreign companies already listed abroad and future stars planning to list on NYSE or NASDAQ.

OTCQB (Venture Market) is mid-tier, focusing on early-stage and developing companies. No minimum financial standards, so low-priced stocks are possible, but annual financial reports must comply with accounting standards.

PINK Market is the “no-barrier paradise”—simply submit electronic forms to the Financial Industry Regulatory Authority (FINRA) to get listed, with no financial disclosures or SEC registration required. As depicted in the movie “Wall Street Wolf,” this market is a mixed bag, with the highest risks.

Investment Guide | Which Market Suits You?

How to buy listed stocks?

Trading in Taiwan: Open a securities account with a Taiwanese broker.

Trading in US stocks: Open an overseas broker account or use cross-trading. Note that US stock trading hours are based on Eastern Time (ET), 9:30 AM to 4:00 PM, Monday to Friday. Due to time differences:

• Daylight Saving Time (March–November): Taiwan time 9:30 PM–4:00 AM
• Standard Time (November–March): Taiwan time 10:30 PM–5:00 AM

Also, watch out for US holidays when markets are closed.

How to buy OTC stocks?

Taiwan OTC trading: Place orders through a securities broker, sign an account agreement, and open an account.

US OTC trading: Most overseas brokers support OTC transactions; after opening an account, you can participate.

How to buy Emerging Stock Board stocks?

This process is the most complex. First, confirm whether your broker supports “Emerging Stock Board trading,” then open the trading function either at the counter or online, and sign a risk warning document.

Once enabled, restrictions are maximum: only spot trading, no margin trading or short selling, and must trade in whole lots (1000 shares). Emerging stocks use “negotiated trading” rather than automatic matching. Orders are matched only when both parties agree, resulting in slower transactions, larger price swings, and the lowest liquidity.

Who is this suitable for? Only high-risk takers capable of judging financial authenticity, experienced in momentum trading, and with small capital.

The Balance of Returns and Risks

Pros and cons of investing in listed stocks

Advantages:

According to statistics, the S&P 500 has an average annual return of about 10% over the past 30 years, far exceeding bonds at around 5%. Stocks are better at combating inflation—Dow Jones’s 30-year return is 8.7%, easily offsetting inflation erosion. Many listed companies also pay quarterly dividends, providing passive income.

Risks:

Market volatility is the most direct risk. Fluctuations over 10% are common in the short term. Additionally, investing requires personal research into fundamentals and technicals, and market changes are rapid, making follow-up costly. For busy professionals, the learning curve is often underestimated.

Risks and opportunities in OTC stock investment

Advantages:

OTC markets offer a broader investment scope. Many internationally renowned companies (e.g., Volkswagen VWAGY.US) choose OTC instead of secondary listing. OTC stocks are usually cheaper, lowering the entry barrier—stocks at NT$1 can yield 50% returns if they rise to NT$1.50.

Risks:

Limited regulation is the biggest concern. Companies disclose far less data than listed firms; pink market has no disclosure requirements at all, making it highly speculative. Low trading volume causes liquidity issues—you might face “no buyers” situations, leading to delays or wider bid-ask spreads. OTC stocks are also sensitive to macroeconomic data, prone to large swings upon data releases.

Three Steps for Beginner Investors

Step 1: Assess your true financial situation

Before starting, clearly calculate your income, living expenses, debts, and savings. Understand how much “spare money” you have for investing. Remember, stock investing can grow wealth but is not a get-rich-quick scheme. Never risk your entire life savings in the stock market.

Step 2: Do solid analysis

Mastering investment knowledge is essential. Read financial reports, listen to earnings calls, study industry reports from analysts—these are must-do tasks. Information processed by professional analysts is often easier to understand and helps you make more accurate judgments.

Step 3: Set clear investment goals

Without goals, you risk being led by daily news and short-term fluctuations. Set financial targets monthly and yearly, giving you a compass to stay on track amid market noise.

Choose Your Investment Starting Point

Listed stocks are the best entry ticket. Stable liquidity, transparent information, and relatively moderate volatility allow beginners to learn and grow in the most friendly environment. After accumulating enough knowledge and experience, consider advancing to OTC or even Emerging Stock Board.

Three markets, three risk levels, corresponding to three types of investors. Find the one that suits you, and your investment journey will be steady and far-reaching.