The Penny Stocks

the penny stocks

The Hows Of Trading Penny Stocks

Penny shares are traded thru the OTC Bulletin-board r the Pink Sheets and are set at between 1 cent and $5. You may also trade these stocks through foreign and other securities exchanges. However , when trading penny shares you have to be privy to the rules that apply to the trade of penny stocks. The guidelines set down by the Securities and Exchange Commission (SEC) to help control the trade of penny stocks and shares are as follows:

The SEC needs the brokerage house to have documented proof of the exchange between them and their shopper, which can only happen if their customer is ready to complete the transaction.

The agent must provide their customers with documentation outlining all of the potential hazards that are involved with low-priced stock trading.

If there's a market quotation on the penny stocks they'd like to buy the buyers must be informed by their broker.

The broker must also communicate to their clients what their commission will be for the trades.

The low priced stock rules also say the brokerage house must also provide their customers with monthly statements that disclose the value of each low-priced share the shopper owns.

The rules ruling the trade of penny stocks were established to make certain that trades were fair and that speculators knew about the risks before investing. These rules were set in place by the SEC to ensure that new stockholders knew what they were getting into and that they would not get in over their heads.

The low-priced share rules include a Buyer Protection Rule (Rule 15c3-3) that states that all the money you pay to the broker is in their control. The broker must then periodically figure what quantity of the money being held belongs to the consumer of has been gained through stocks owned by the shopper. If the broker determines that there's more money on their books than what's owed to their customer or if the shopper has paid more to the broker than was required then the remainder is placed into a reserve account. This money is then set aside for the explicit usage of the customers. The rule stops brokers from using a consumers cash to advance their own business.

These rules are designed to defend the customers as well as the market and even the broker. Any broker who breaks the SEC’s rules is probably going to become the subject of and SEC investigation which may be trouble for the agent as well as the broker themselves. SO it is important that any new financier is aware of these rules to make sure that their broker follows them all so that their investments aren't tainted in any way.

Todd Watson trades in Forex, tests Binary Option strategy and is always hunting for the next best Forex Robot.

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