U.S. pot market starting to catch up to Canada
Canada has a challenger to its status as the pot-stock capital of the world — the scrappy overthe-counter market in the U.S.
There are now 136 cannabis-related securities on OTC Markets Group Inc.’s main and venture market. That compares with 144 companies on Canadian exchanges.
With marijuana illegal at the federal level in the U.S., the big exchanges like the NYSE and the Nasdaq only allow listings from companies that don’t have American operations, including five Canadian producers. Rules on the New York-based OTC markets are less stringent and allow companies on qualified foreign exchanges to trade without registering with the Securities and Exchange Commission. Fees are also lower.
“The exchanges are very risk averse. They’re old, staid institutions,” Jason Paltrowitz, executive vice-president of corporate services at OTC Markets, said in a phone interview. “We want to be the market for entrepreneurs.”
The OTC’s growing presence in the cannabis space is aided by a partnership with the Canadian Securities Exchange, jokingly referred to as the Cannabis Securities Exchange for the zeal with which it’s embraced the industry. Formerly focused on junior miners and energy companies, pot stocks now make up about a quarter of the CSE’s approximately 450 listings. Of those, 116 trade on OTC markets, including 13 pot stocks on the top-tier OTCQX.
Although dual-listing on the NYSE or Nasdaq provides a higher profile than the OTC, it can also draw trading volumes away from the home market. By contrast, a 2017 study commissioned by OTC found that firms listed on Canadian exchanges saw a 35 per cent increase in average daily trading volume in their home market after joining OTCQX.