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NASD OTC opens unlisted securities for lien arrangements

NASD at the end of its weekly transactions announced that it has been resolved that unlisted securities be used for lien arrangements.According to NASD, “both…

NASD at the end of its weekly transactions announced that it has been resolved that unlisted securities be used for lien arrangements.
According to NASD, “both shareholders and lenders will be pleased to learn that OTC trading stocks now qualify for lien arrangements due to a joint effort of NASD OTC and Central Securities Clearing System (CSCS).
The firm said, “The legal right of a creditor to sell the collateral property of a debtor who fails to meet the obligations of a loan contract.  …If the debtor never pays, the property can be auctioned off to pay the lien holder.”
Before the NASD OTC market opened, unlisted securities were applied to lien with great difficulty and at great cost.  The arrangements were sometimes difficult to enforce if necessary and discounts on the value of the stock were usually deep (or at nominal value) due to absence of a universally accepted price (such as a daily closing price).
NASD however, provides universally acceptable prices as a reference while the clearing system will hold dematerialised shares according to the terms of the borrower and lender agreement.
“If the borrower pays, the shares are returned and if the borrower defaults the shares can be auctioned off on the NASD OTC market,” NASD stated.
Meanwhile, as the OTC market starts to stabilise and public confidence in the OTC market grows, NASD OTC has introduced a price band of 15 per cent (either up or down) from daily opening price.   
The introduction of price bands has come after a free pricing regime which existed in the first 18 months of the OTC market.
The price band will be in effect from February 2, 2015 and all participating institutions will execute mandates within the 15 per cent bands.

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