Although its name suggests that OTC Markets Group Inc. is one of the many internationally active over-the-counter multi-trading platforms attempting to attract liquidity and thus trading volume away from established trading venues, the opposite is true. OTC Markets is one of the largest US stock market in terms of trading volume after the New York Stock Exchange (NYSE) and Nasdaq, and the largest US trading venue for foreign shares.

finews.com met Executive Vice President Jason Paltrowitz in Zurich during a promotional tour of Europe.

«List local, trade global»

He is combating the ‘media narrative’ that more and more European companies should prefer the NYSE or Nasdaq to their home stock exchange as the primary trading venue for their shares. OTC Markets is guiding Swiss and European companies to: «List local, trade global.»

Paltrowitz knows the US financial industry and the market infrastructure behind it inside out, having been responsible for securities custody, clearing and collateral management as Managing Director at J.P. Morgan's investment bank, among other things, before joining the company in 2013. He also held senior positions for many years at BNY Mellon, a bank specialising in securities administration services.

Exemption from US Stock Exchange Law

Our business model is built around a distinct regulatory framework,» explains Paltrowitz. Their market is the only US trading venue for shares in foreign companies that are not subject to the complex and costly regulations of the US Securities and Exchange Commission (SEC) and US stock exchange law, including corporate governance provisions (e.g. Sarbanes Oxley).

The condition: companies must prove that they are listed on an adequately regulated stock exchange abroad (usually in their country of domicile). Accordingly, OTC Markets acts as a secondary market – and thus does not compete with established Europeantrading venues. Transactions on OTC Markets involving foreign shares are usually reported on the home exchange, which means that liquidity is not fragmented. On the contrary: «We bring liquidity to the Deutsche Börse and the SIX Swiss Exchange because certain US investors can only invest in such shares thanks to us.»

Liquidity from the US Market Benefits the Domestic Stock Exchange

When it comes to highlighting the advantages of his model over the NYSE and Nasdaq, the executive is in his element. «Our costs are only around 10 per cent, and foreign companies are still represented on a regulated and liquid US stock market, making it easy for American investors to invest in their shares.» He adds: »It is better for Swiss companies to maintain their listing in Switzerland: rather be a big fish in a small pond, than a small fish in a big pond.»

OTC Markets' services also include ensuring that all relevant stock market information on foreign shares is disseminated in English via channels such as Bloomberg or Charles Schwab, and that the shares are also assigned their own US-compliant tickers (stock market symbols).

Roche: Happy Client since 2008

Paltrowitz already counts several well-known Swiss companies among his clients. Roche was the frontrunner among stocks in the DACH region in the third quarter with sales of $3.5billion, but Zurich and Sandoz also recorded significant volumes of 226 and 87 million respectively. «Roche has been our client since 2008 and is very happy with us,» says Paltrowitz.

The Sandoz case is interesting, as it involves a spin-off of Novartis, which is itself listed on the NYSE. «And the fact that Novartis sought a different path for its subsidiary than for itself speaks volumes,» notes Paltrowitz. «Lawyers, accountants and auditors are also quite expensive in the US.»

Increasing US Investors' interest in European stocks

He has also observed increased interest among US investors in foreign stock markets, particularly in Europe – which naturally promises growth for his business. The US market is heavily dominated by tech and AI stocks (Mag 7), and this cluster risk is compounded by the weak dollar and key events such as Liberation Day. European equities are trading at a discount to their US counterparts, even though the outlook for the European economy and thus for companies has brightened significantly.

The increase in demand is reflected in the figures. While the volume of European equities traded on OTC Markets in the first three quarters of 2024 was still 166 billion dollars, it has already reached 255 billion in the current year. For Switzerland, the figures are 39 and 45 billion dollars respectively.

The Juicy Example of the London Stock Exchange

As a rule, European companies register with OTC Markets to make their shares more easily tradable for US investors. A recent example of this is the London Stock Exchange, which for obvious reasons was reluctant to strengthen its direct competitors NYSE or Nasdaq by trading its own shares on their markets.

In addition to its premium market OTCQX, OTC Markets also has the «Pink Limited», where companies are listed at the request of brokers – and which occasionally serves as a springboard into the main segment.

Close Relationship with Aquis and Dialogue with SIX

During his visit to Zurich, Paltrowitz also met with management and listing specialists at SIX Swiss Exchange. «We help European stock exchanges to keep companies in their home countries, avoid fragmenting liquidity and, at the same time, open up access to a broad investor base in the US.»

He also highlights OTC Markets’ long-standing relationship with trading platform provider Aquis, which SIX acquired this year. «We have been working closely with this technology partner for a long time.» All parties involved – the companies and the home exchange – benefit when OTC Markets, as a capital-markets conduit to the US, helps increase liquidity in the country of domicile.

Crystal-Clear Stance on Private Markets

When asked about the boom in private markets, Paltrowitz is blunt. Private markets, he argues, cannot match public, regulated markets when it comes to price discovery and transparency. His pointed rhetorical question on this: «Do you remember the WeWork affair?»

At least on this issue, he is likely to share the same view as his rivals at the NYSE and Nasdaq.