## Understanding the Structure of Taiwan and US Stock Markets: Core Differences Between Listed, OTC, and Emerging Markets

Want to start investing in stocks but feel confused by concepts like "listed," "OTC," and "emerging"? These three terms reflect different levels of risk in trading markets. Let’s approach this from an investor’s perspective to clarify the differences in these market structures.

### The Positioning of the Three Markets: From Mature to Emerging

**Listed Market: The Mainstream Stable Choice**

Listing is the highest threshold for companies entering the securities market. In Taiwan, listed companies are traded on the "Taiwan Stock Exchange" (TWSE), representing industry leaders like TSMC, Delta Electronics, MediaTek, and others. In the US, the main boards are the New York Stock Exchange (NYSE) and NASDAQ.

Why are listed companies trustworthy? Because regulators set strict standards—large company size, mature operations, transparent financial reports, and regular disclosure of financial data. These requirements ensure investors can see the true state of the company. Conversely, companies that do not meet exchange standards face delisting risks.

The benefits of investing in listed stocks are clear: **high trading volume, strong liquidity, relatively moderate volatility, and lower risk**. Suitable for beginners, investors with low risk tolerance, and those interested in long-term investment.

**OTC Market: Balancing Growth and Opportunities**

OTC (Over-the-Counter) is the "middle layer" between listed and emerging markets. In Taiwan, OTC companies are traded on the "TPEx" (Taipei Exchange). Unlike the centralized matching of listed stocks, OTC trading involves broker-dealer inventories. In the US, OTC markets include OTCQX (Best Market), OTCQB (Venture Market), and PINK (Pink Market).

OTC market features: **looser approval standards, the difference between listing and OTC lies in risk and opportunity trade-offs**. It hosts many growth-oriented companies, thematic stocks, and mid-sized firms. Volatility is higher than listed stocks, but so is potential. OTC stocks have moderate trading volume and liquidity, suitable for investors with some experience who can bear medium risk.

**Emerging Market: A High-Risk, High-Return Testing Ground**

Emerging stocks (Emerging Stock Board) are companies that haven't yet met OTC standards but want to raise funds and build reputation early on. Startups, biotech, medical device companies, and small to medium enterprises are common here.

Emerging stocks carry the highest risk: **no price fluctuation limits, extremely low liquidity, poor financial transparency, and negotiated trading rather than automatic matching**. This means you may face sharp swings or find it hard to sell. Emerging markets are definitely not suitable for beginners and should not be a primary investment focus.

### Comparing the Three: See the Differences at a Glance

| Dimension | Listed (TWSE/NYSE) | OTC (TPEx/OTC) | Emerging |
|--------------|---------------------|----------------|----------|
| **Company Type** | Mature large enterprises | Growth-oriented, mid-sized companies | Startups, early-stage companies |
| **Regulatory Strictness** | Strictest | Moderate | Loosest |
| **Profit Requirements** | High | Moderate | Almost none |
| **Financial Transparency** | High | Moderate | Low |
| **Trading Volume/Liquidity** | High | Moderate | Lowest |
| **Price Volatility** | Minimal | Moderate | Maximal (no fluctuation limits) |
| **Trading Method** | Centralized auction | Centralized auction | Negotiated one-on-one |
| **Suitable Investors** | Beginners, conservative | Intermediate investors | High risk-tolerant investors |

### How to Trade in the Three Markets?

**Trading Listed Stocks**

Taiwan listed stocks: Open an account with a Taiwanese broker for direct trading.

US listed stocks: Open an overseas broker account or use a domestic broker for proxy trading. Note the time difference—US market hours are based on Eastern Time. During daylight saving time (March–November), trading hours are 21:30–4:00 Taiwan time; during standard time (November–March), 22:30–5:00. US holidays also mean market closures; always check before trading.

**Trading OTC Stocks**

Taiwan OTC: Place orders through a securities broker; after account setup, you can trade.

US OTC: Most overseas brokers support OTC trading; after opening an account, you can buy and sell directly.

**Trading Emerging Stocks**

Emerging stocks have the highest entry barriers. First, confirm if your broker supports "Emerging Stock Board" trading, then open the feature either at the counter or online, and sign a risk warning form. Trading restrictions include: only spot trading (no margin, short selling, or day trading), must trade in whole lots (1,000 shares), no price fluctuation limits, and slower transaction speeds.

### How Strict Are the Entry Conditions for Listing and OTC?

**High Walls for Listing**

Taiwan listing requirements: Companies must meet five major conditions: registered for at least 3 years, paid-in capital over NT$600 million, profitability standards (e.g., pre-tax profit over 6% of equity in the last 2 years or over 3% in each of the last 5 years), more than 1,000 shareholders (including over 500 external shareholders holding more than 20%).

US listing standards vary by exchange. NYSE has higher thresholds; NASDAQ is divided into three markets (Global Market, Capital Market, and SmallCap), with standards becoming more lenient from strict to relaxed. Even unprofitable companies can list on NASDAQ if they meet 2-year operational history and have at least $5 million in shareholder equity.

**Moderate Barriers for OTC**

Taiwan OTC: Companies must be registered for at least 2 fiscal years, have paid-in capital over NT$50 million, pre-tax profit over 4% of equity (or over 3% in the last 2 years), and at least 300 external shareholders holding more than 20%.

US OTC: Relatively lenient—OTCQX and OTCQB require submission of necessary documents and maintaining a share price above $0.01 for 30 days; Pink Market only requires a single form.

### Advantages and Risks of Investing in Listed and OTC Stocks

**Attractions of Listed Stocks**

Core advantages: Potential returns surpass bonds (S&P 500’s average return over nearly 30 years is about 10%, bonds around 5%), many listed companies pay quarterly dividends, and stock yields often beat inflation (U.S. Bureau of Labor Statistics shows Dow Jones returns at 8.7%).

But risks cannot be ignored: market volatility can cause over 10% losses in short periods, stock picking requires extensive research, and continuous monitoring of company and market dynamics is necessary.

**Opportunities in OTC Stocks**

OTC advantages: broad investment scope (many international companies like Volkswagen trade on Pink Market but are not listed in the US), low-priced stocks can yield high multiples (e.g., rising from $1 to $1.5 yields 50%).

OTC risks: limited regulation, incomplete information disclosure (Pink Market disclosures are minimal), low trading volume may make selling difficult, sensitive to macroeconomic data, and large bid-ask spreads.