For the New Preferred Investor – Buying on the OTC Grey Market

As we were writing another article today we had a need to reference an old article we wrote in 2013 on trading on the OTC Grey Market.

The article is over on the DividendInvestor.com site (owned by the company that bought the old Yield Hunter website I owned).

While most of us are familiar with the process of OTC trading I guarantee you there are hundreds of folks visiting daily that are searching for further info on the process — which is why we are posting this link.

Buying On the OTC Grey Market

21 thoughts on “For the New Preferred Investor – Buying on the OTC Grey Market”

  1. @ IVAN
    To trade on the OTC Grey Market, in Europe we generally employ brokers like Binck Banck or Interactive Brokers. However, be aware that the item you trade must be identified using its CUSIP or ISIN.

  2. Can you recommend a broker for trading on the OTC Grey Market for non-US citizens ?

    1. Ivan, is there a US based brokerage firm (Citibank, Merrill etc) that has branches near you or a investment banking presence in your home country?
      Wishing you profitable investing, Nomad

  3. MBFIO was de-listed in March. Now shows as 55264U405 in my ETRADE account. They tell me I will still receive distributjavascript:history.bacions, but I cannot sell it until it is in OTC. Any thoughts?

    1. Ray, I bought on delistment notice sell off myself. At 6.2%, below par and about to kick out a divi next month. What is there not to like? Just think your account is probably showing $0.0 but yet you get $1.50 a year from every share that is worth $0.0. That is a great return off zero! 🙂 I dont give it any thought of worry. It will take care of itself in due time.

      1. Grid, I am “long” MBFIO in my Merrill Edge account and the preferred shows a CUSIP number and the price at $25. The only people that should be concerned are those that want to/need to sell it or if you had margin against the security. I am happy to just get my quarterly dividend as I have no plans on selling this quality income security backed by monster Fifth Third Bancorp (FITB).
        Be well my friends, Nomad

    1. Thanks Bigbear–I forget sometimes that the vast majority of folks on this site don’t make comments but are just searching for info and I want to help a little if I can.

      1. Tim – Thanks so much for this post. I had actually seen it previously while searching the grey market. However, I am still somewhat confused. Are there separate brokerage firms that deal only in the greys or do your standard brokerage firms sell them but only on the temporary tickers until they hit the NYSE?

        1. Pete, I really consider there being two grey markets. The lead in to a permanent ticker being assigned such as the underwritten new issues that Tim so graciously covers with his time here. And then there is the old school grey market. These issues have been delisted with a ticker and they trade blind. There are no official bid or asks and no market makers for the issue. And certain brokerages may have inventory to sell or they may not, thus seeing purchased trades transacted at a lower price than say your bid was at.
          For example I bought a true delisted grey market yesterday. An old Indianapolis Power and Light issue. No bids or asks are posted so its flying blind. This is also a home to penny stocks and junk debris flying around on pump and dump too.

          1. Very helpful Tim and thanks to all. Question: what is the best way you have found to sell delisted grey market or ultra low volume OTC issues with no ask visible? Grid, such as the IPL issue you mentioned which trades once in a blue moon.

            1. SunnyFlorida, I dont know if its efficient, but I go through OTCMARKETS.COM
              Here is link with IPWLO teed up. Notice in upper right hand corner of page the insignia of “Grey Market”.
              https://www.otcmarkets.com/stock/IPWLO/overview
              If you go under “learn” tab at top you will see as options “stock screener”. Then filter it to preferred stocks. It will then pop them all up. I dont look directly for grey markets per se. It just happens..Take IPWLO. I have no understanding why sister preferreds IPWLK, IPWLN, IPWLP are pink sheet OTC with bid/asks, while IPWLO and IPWLG are pure grey markets.

              1. Fantastic – many many thanks for the link Grid! I’m assuming that if you ever want to sell IPWLO, you basically put a GTC sell order out there at your target price, wait for any takers and adjust the ask accordingly through trial and error?

                1. Yes, it would be hit or miss. To be honest, I only bought 100 to amuse myself. I have tried various times over the years to snag it or IPWLG in the 80s with no luck. I just kind of noticed it hadnt traded in such a long time there may some shares out there ready to sell at well below last sell price. I noticed 130 more shares were sold at same price right after my purchase.
                  The float is only 19,000 and are largely institutionalized.
                  Probably just hold them and forget about them. If IPWLK which I own were ever redeemed the entire series would go too. AES has already did this with DAYPO (Dayton Power and Light) a couple years ago and they were all old 3.5-4% issues.

                  1. I own IPWLK and was wondering as well about the whole series eventually being redeemed- especially since IPWLO looks to be 60+ years past its 1950 call date. You’re such a wealth of information Grid — I had no idea about DAYPO. I’m always amazed by the rich history you and others in this great community know and so generously share. Thank you!

                    1. Sunny, you just never know about these things…In 1997 IPALCO issued a tender to all of the old IPL series at various tender prices. In 1997 for example 39,000 shares of IPWLO were outstanding. Almost 20,000 accepted the $77.72 tender offer leaving the present 19,331 shares outstanding. But keep in mind during this late Fall 97 tender the 10 year was a whopping 6.10% yield. They also redeemed the 6% and 8.2% issue at the same time…Then just a couple months later the 5.65% preferred was issued in January 1998. The 10 year at that point was 5.42%….Many would be surprised a perpetual preferred could be issued at such a tight spread to the 10 year. In fact it has happened frequently in the long ago past.

                  2. Thanks very much for your reply and your explanation of the two grey markets. As clarification, it is my understanding that the first grey market is merely the time in which a new issue trades prior to receiving its permanent ticker and may be at any brokerage. I think the term “market” had me confused. Ha, I’ve been a grey market trader for months and didn’t even know it. The second grey market is a totally different deal that I probably won’t enter into, but thanks for the link to an extremely informative site at OTC Markets.Com.
                    My light bulb may still be dim, but at least it is now turned on due to this site!

              2. Thanks Grid! You just keep rolling out those gems of experience for the members here.

                1. Anytime, Mikeo. Please keep in mind to separate the info from the pick. I truly doubt for example IPWLO serves anyones basic needs looking for income here. One can find better yield and just as safe elsewhere. I always like to own a few of these type just because. It kind of pairs with my IPWLK.

        1. (Tim: “I forget sometimes that the vast majority of folks on this site don’t make comments but are just searching for info and I want to help a little if I can.” You are. Hard to believe the education and leads you are presenting. Thank you!

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