Since most stock scams involve penny stocks, it is worthwhile to know where these stocks trade and where they do not trade. There is no definition per se of a penny stock. To some it is any stock whose price is under one dollar. Others feel it is any stock that trades under five dollars where it trades on the Over-the-Counter Bulletin Board or in the pink sheets.

National Market System

The Over-the-Counter market is comprised of three parts. One part is the National Market System (NMS) of the NASDAQ (National Association of Securities Dealers Automated Quotation) System, which does not include any penny stocks.  This Market Systems plays host to stocks like Dell and Microsoft.

Over-The-Counter Bulletin Board (OTCBB)

The second part is the non-NMS NASDAQ securities, including some penny stocks. The OTCBB is an electronic quotation system that displays quotes information for many OTC securities that are not listed on the Nasdaq Stock Market or a national securities exchange. Brokers who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities. Be aware  that the OTCBB is not part of the Nasdaq Stock Market. Many scam swindlers falsely represent that an OTCBB company is a Nasdaq company when it fact it isn’t. This is important since OTCBB companies are not subject to the same stringent listing or ongoing filing requirements that NASAQ companies are subjected to. As well you will not be able to look in the newspaper to track the stock prices of these OTCBB companies. You will need to rely on your broker for all price information.

Pink Sheets

The third part is the National Quotation Bureau's (NQB) service, commonly referred to as the "pink sheets." These stocks are quoted in a daily circular known as the "pink sheets," so named for the color of the paper on which they are printed.  To obtain the price of these stocks it is necessary to for broker-dealers to call the trading desks of “market makers."