Charles Schwab Corporation Statement on OTC Stocks

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Due to unusually high volume, third party dealers that typically make a market in Over The Counter (OTC) securities may suspend or limit trading activity in certain OTC stocks without providing notice to Schwab.

While Schwab and TD Ameritrade plan to continue accepting client orders for trades of OTC stocks during this time, many OTC stocks do not trade on an exchange. As a result, Schwab and TD Ameritrade can only execute a client’s order if a separate market maker (not Schwab or TD Ameritrade) is willing to do so. If they are not, there is not a way for Schwab or TD Ameritrade to execute the order. As a result, clients may experience delays in their order executions for some stocks due to a lack of active bids and offers from the market makers. If Schwab or TD Ameritrade is unable to identify any third party dealer or market maker that is currently willing to purchase or sell a particular OTC stock, the firms may reject the entry of such an order, cancel a previously accepted order, or suspend the execution until a willing third party dealer or market maker is identified.

Please note: Neither Charles Schwab & Co. nor TD Ameritrade have halted the buying or selling of any OTC securities and neither Schwab nor TD Ameritrade act as dealer or market marker with respect to any OTC stock.

It is important for all investors to understand the risks associated with executing trades in specialized Over The Counter securities, especially during periods of high volatility. Investing in OTC securities can be very risky. These securities represent low-priced shares of new or small companies, foreign equity issues, warrants, units, ADRs, and DPPs that do not qualify for trading on a national stock exchange. Instead, third party dealers and market makers not affiliated with either TD Ameritrade or Schwab, who are not required to make a market in the security or to hold shares in inventory, trade the securities on a manual basis in the "over-the-counter" market. As the securities are not traded through automated execution systems, accurate quotation information and immediate executions may not be available, and it is not uncommon for the manual execution process to be delayed or unable to complete.

During periods of market disruption or extreme volatility, such as is currently being experienced, there may be a high likelihood of OTC orders NOT being executed or being cancelled. When fewer shares of a security are being traded by third party dealers and market makers, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in many OTC securities, in addition to a lower likelihood of your order being executed, there is a risk that current prices may differ significantly from the price you were quoted at the time of order entry.

For example: An investor would like to sell 10,000 shares of a stock that trades on the over-the-counter market. The investor submits an order to his or her broker-dealer. The investor’s broker-dealer begins to look for another broker-dealer that is willing to act as a “dealer” by making a market in certain OTC securities. Unfortunately, the investor’s broker-dealer determines that no one has traded that stock for weeks. The last sale was at $20.50. The current market is $10 bid and $25 offered. There are only 1,000 shares to buy and 5,000 for sale. With such a thin market, the investor is forced to decide between selling at a lower price than expected or placing a limit order at the stock’s last sale price and waiting for an undetermined amount of time. At some point, if the investor’s broker-dealer is unable to find an available market for the investor’s order, the investor’s broker-dealer may cancel the order.

For more information on Over The Counter stocks, please visit www.schwab.com/stocks/understand-stocks/otc-stock or secure.tdameritrade.com/about/otcbb_disclaimer.

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