Yellow Sheets: What Are They?
For bond traders, yellow sheets act as bulletin boards, offering details on corporate bonds that are offered for sale over-the-counter (OTC).
Each bond’s yield, volume, high, low, closing price, and bid-ask spread are all included in the sheets.
Yellow Sheets are published by the OTC Markets Group, previously the National Quotation Bureau (NQB).
Additionally, the company distributes pink sheets that include comparable information on stocks that are traded over-the-counter.
Both bulletins have been distributed online in real time since 1999.
KEY POINTS
- Yellow sheets are bulletins that provide traders with information on corporate bonds that are available for over-the-counter trading from brokerages where they may be purchased.
- In the case of equities that are traded over the counter, pink sheets represent the identical product.
- OTC Markets Group is now publishing yellow sheets and pink sheets, which are now classified as electronic services.
- Securities that are issued by corporations that are not listed on the main public markets are listed on both of these exchanges.
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Understanding the Yellow Sheets
Information on bonds issued by companies not listed on a national market is available on yellow sheets.
These unlisted companies can be small and unknown, or they might still be forming.
A significant portion did not meet the requirements to be listed on public exchanges.
The over-the-counter (OTC) market is a decentralized securities trading platform.
There is no established marketplace or physical location for dealers in the over-the-counter (OTC) market.
Contact information for the brokerages that enable trading in these bonds is included in the yellow papers.
A network of market makers exchanges yellow sheet bonds via a closed system that users may access in both digital and physical media.
If a subscriber wants to purchase a particular bond, they may contact the appropriate brokerage using the information on the yellow sheets.
Yellow-Sheet Bonds
Compared to other fixed-income securities, bonds listed on the yellow sheets are often thought to be riskier.
Since the companies issuing these bonds are not listed on any public U.S. stock exchange, they are not subject to the stringent laws and transparency requirements that apply to publicly traded companies.
Many well-known foreign companies are listed in the United States via over-the-counter markets, often as American Depositary Receipts (ADRs).
Bonds placed on yellow sheets naturally have a wider bid-ask spread to cover the risks associated with these companies.
The company going bankrupt and defaulting on the bonds is the main risk.
There is also an increased danger of liquidity.
If the investor plans to sell the bond, its marketability may be restricted or nonexistent.
The Over-the-Counter Markets Group and Yellow Sheets
In order to provide investors access to information on over-the-counter stocks and bonds, the National Quotation Bureau (NQB) was established in 1913.
The NQB employed different colored paper to spread information in its early years, and the bulletins later used the same identification as the paper color.
The pink sheets displayed stock quotes, while the yellow sheets displayed bond quotes.
Commerce Clearing House purchased the NQB in 1963.
The NQB stopped printing its well-known printed bulletins in 1999 and began operating mostly online.
Since then, the NQB has changed its name to OTC Markets Group.
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