Complete Guide to the Three Levels of Stocks: Understand the Meaning of Listed, OTC, and Emerging Markets in One Go, and How Beginners Should Choose?

Three Trading Worlds of the Taiwan Stock Market

Want to invest in the stock market but confused by “Main Board, OTC, Emerging”? Actually, the core differences among these three lie in regulatory thresholds, risk levels, and liquidity strength. Understanding their meanings and positioning in listing and OTC is the first step in making investment decisions.

Main Board: The Main Stage for Large Enterprises (TWSE)

Main board companies are traded on the “Taiwan Stock Exchange” (TWSE), representing companies that have passed the strictest review process. Benchmark companies like TSMC, Delta Electronics, and MediaTek are listed here.

Features of investing in the main board:

• Large trading volume, transactions can be executed anytime
• Price fluctuations are limited, relatively stable
• Highest financial transparency, quarterly reports must be disclosed

For beginners, stocks listed on the main board are like a “safe investment zone”—low thresholds, clear rules, limited risk of loss.

OTC: The Stage for Growth-Oriented Companies (TPEx)

OTC trading occurs at the “OTC Trading Center,” with a different matching method—broker-dealers hold stock inventories and facilitate trades. Here, not only stocks are traded but also bonds, foreign exchange, cryptocurrencies, and other assets.

Features of OTC investments:

• Looser inspection standards than the main board
• Moderate trading volume, occasional liquidity gaps
• Larger price swings, but also greater growth potential

OTC stocks are suitable for investors with some experience who are willing to take on higher risks.

Emerging: The Cradle for Startups and Themed Stocks

Emerging is a “transitional platform” before companies move to the OTC. Startups, biotech, medical device, and R&D companies often raise funds and build market recognition here.

Features of emerging stocks:

• No price fluctuation limits—up 50% or down 50% in a day is possible
• Very low trading volume, often no buyers or sellers
• Least transparent information, financial reports are irregular

Emerging stocks are said to offer the greatest opportunities but also the highest risks. Never allocate more than you can afford to lose.

Comparison of the Three Investment Levels

Hierarchical Structure of the US Stock Market

The US OTC market is much more complex than Taiwan’s, divided into three risk levels:

Best Market (OTCQX) — Most regulated

• No penny stocks or shell companies allowed
• Must report financials to the SEC
• Includes foreign companies already listed or planning to list on NYSE/NASDAQ
• Risk level: Low to medium

Risk Market (OTCQB) — Middle tier

• Allows penny stocks and shell companies, but not bankrupt firms
• Companies must submit GAAP financial statements
• Focuses on early-stage and developing companies
• Risk level: Medium

Pink Market (PINK) — Zero regulation

• No listing requirements, only submit forms to FINRA
• No SEC oversight, no financial disclosures required
• A mix of legitimate and scam companies, highest fraud risk (main trading target in movies like “The Wolf of Wall Street”)
• Risk level: Very high

How Strict Are the Listing and OTC Application Conditions?

Taiwan Listing Thresholds

To list on TWSE, companies must meet:

1. Age: Registered for at least 3 years under the Company Act
2. Capital: Over NT$600 million
3. Profitability: Pre-tax net profit to equity ratio of over 6% in the last two years, or over 3% for five years
4. Shareholder Structure: At least 500 registered shareholders excluding insiders, holding over 20% of shares or 10 million shares

Taiwan OTC Thresholds

OTC standards are relatively lenient:

1. Age: 2 full fiscal years
2. Capital: Over NT$50 million
3. Profitability: Pre-tax net profit to equity ratio over 4% in the most recent year, or over 3% in the last two years
4. Shareholder Structure: At least 300 registered shareholders excluding insiders, holding over 20% or 10 million shares

US Stock Listing Difficulty Levels

US listing criteria are more flexible than Taiwan’s:

NYSE — Highest standards

• Minimum 5,000 investors
• At least 2.5 million shares publicly held
• Minimum public market capitalization of $100 million

NASDAQ Global Market — Second highest

• Minimum 450 investors
• At least 1.25 million shares publicly held
• Average market cap of listed shares at least $550 million

NASDAQ Capital Market — More lenient

• Minimum 300 investors
• Net income of $750,000 in the past year or $5 million in shareholders’ equity

US OTC Market — Significantly lower thresholds

• OTCQX and OTCQB require only submission of documents, with recent stock price not below $0.01
• Pink market has no thresholds, just a form

How to Buy the Three Types of Stocks? Complete Operation Guide

Buying Main Board Stocks

Taiwan stocks: Open a securities account with a broker, then place orders online or in person.

US stocks: Open an overseas broker account or use a cross-trading service. Be aware of time differences—US trading hours are:

• Daylight Saving (Mar–Nov): 21:30–4:00 Taiwan time
• Standard Time (Nov–Mar): 22:30–5:00 Taiwan time

Suitable for: Beginners, conservative investors, long-term holders, those interested in blue-chip stocks.

Buying OTC Stocks

Taiwan OTC: Place orders through a securities broker, requiring a signed account agreement.

US OTC: Most overseas brokers support OTC trading (OTC markets), just open an account to trade.

Suitable for: Investors with some experience, moderate risk tolerance, interested in themed and growth stocks.

Buying Emerging Stocks

Most challenging:

1. Confirm that your broker supports “Emerging Market” trading
2. Open OTC trading functions at the broker (signing a risk warning)
3. Only spot trading allowed; no margin or day trading
4. Must trade in whole lots (1,000 shares)
5. Negotiation-based trading—slower execution, large spreads, no price limits

Suitable for: High risk tolerance, stock research skills, small proportion of portfolio, active traders. Not suitable for beginners or risk-averse investors.

Balancing Investment Risks and Rewards

Facts about investing in main board stocks

Potential advantages:

• Average annual return about 10% over the past 30 years (far exceeding bonds at 5% and fixed deposits)
• Beating inflation: S&P 500 annual return of 10%, Dow Jones 8.7%, offsetting rising prices
• Continuous dividend income: Many listed companies pay quarterly dividends

Potential risks:

• Short-term volatility is common: daily drops over 10% are not rare
• Requires time to research: fundamentals, technicals, industry trends
• Ongoing monitoring costs: markets change fast, need regular follow-up

Facts about investing in OTC stocks

Potential advantages:

• Wide investment scope: many internationally known companies (e.g., Volkswagen VW) choose OTC instead of formal listing
• Low cost, high returns: a stock rising from $1 to $1.50 yields 50% return

Potential risks:

• Limited regulation: sparse disclosures, Pink Market may disclose nothing
• Low liquidity: often face “want to sell but no buyers” situations, large bid-ask spreads
• Highly sensitive to macro data: volatile around news releases

Investment Decision Framework for Beginners

If you are new to the stock market, follow this logic:

Step 1: Assess your own conditions

• How much idle capital can you invest? (Do not use living expenses or debt)
• How much loss can you tolerate? (Can you sleep if you lose 20%, 50%, 80%?)
• How much time do you have for research? (5 hours/week vs. 1 hour/month affects trading frequency)

Step 2: Start with main board stocks Avoid jumping directly to OTC. Use main board stocks to learn market operation, build discipline, and gain practical experience. Statistics show 90% of beginners lose money in the first year; the low volatility of main board stocks helps you survive longer.

Step 3: Explore advanced options later Once you can consistently profit, understand risk management, and analyze individual stocks, consider OTC or emerging stocks. Always remember: High-risk assets should not exceed 10–20% of your portfolio.

Step 4: Set clear investment goals

• Define monthly and yearly financial targets
• With goals, you won’t be scared by short-term fluctuations
• Regular dollar-cost averaging is better than timing the market

The three levels—main board, OTC, emerging—each have their positioning. The core difference in their meaning is regulatory strength and risk level. Choosing a market aligned with your risk tolerance is the foundation of successful investing.