What are yellow sheets?
Bond traders may get information on corporate bonds listed on the over-the-counter (OTC) market via yellow sheet bulletins. Each bond’s yield, volume, high, low, closing, and bid-ask spread are all listed on the sheets. The OTC Markets Group, previously known as the National Quotation Bureau (NQB), is the publisher of yellow sheets. The firm also publishes comparable information on equities that trade over-the-counter on pink sheets.
Since 1999, both bulletins have been sent in real-time using electronic means.
Understanding
Bonds issued by businesses not listed on a national market are detailed on yellow sheets.
These unlisted businesses can be little and unknown, or they might just be starting. Many needed help to fulfill the prerequisites for listing on open markets.
The over-the-counter (OTC) market is a decentralized securities trading mechanism. In the OTC market, dealers operate independently from a single physical site or a centralized market. The brokerages that create a market for these bonds may be reached via the contact details on the yellow sheets.
This network of market makers trades yellow sheet bonds via a closed network that users may access online or in physical copy. A subscriber may contact the relevant brokerage using the details provided on the yellow sheets if they want to buy a particular bond.
Bonds in Yellow Sheets
Generally speaking, bonds included in the yellow sheets are seen to be riskier than other fixed-income instruments.
The corporations issuing these bonds are exempt from the strict government regulations and publishing requirements that apply to listed public companies since they are not listed on any public U.S. stock market.
Several reputable international businesses are listed in the over-the-counter marketplaces in the United States, often using American Depositary Receipts (ADRs).
Naturally, bonds listed on yellow sheets have a greater bid-ask spread to offset the risks investors take with these firms.
The primary risk is that the business may fail and stop making bond payments. Liquidity risk is also present. There may be little market if the investor wants to sell the bond.
The OTC Markets Group and the Yellow Sheets
Created in 1913, the National Quotation Bureau (NQB) aims to educate investors about over-the-counter (OTC) stocks and bonds. The NQB first published information on paper of various colors, and the bulletins eventually took on the same name as the color of the article. Bond quotations were posted on the yellow sheets, while stock quotes were shown on the pink sheets.
Commerce Clearing House acquired the NQB in 1963. The NQB stopped publishing its well-known paper bulletins in 1999 and switched to a primarily electronic mode of operation. Since then, the NQB has rebranded as OTC Markets Group.
Conclusion
- Bulletins known as “yellow sheets” notify traders about corporate bonds that may be traded over the counter via brokerages.
- For equities that trade over the counter, pink sheets are the equivalent.
- OTC Markets Group currently publishes electronic services for yellow and pink sheets.
- They both feature stocks from businesses not listed on the main public markets.
