When I sell an OTC stock, do I have to check the volume of my sale in order to avoid an NSCC illiquid charge?

Question

The National Securities Clearing Corporation will charge an illiquid fee if the buy side exceeds 5 million shares or if the sell side exceeds 10% of the 20 day average volume. When I buy an OTC stock, e.g. 20,000 shares, and then want to sell them, do I have to check if the number of shares I'm selling exceeds 10% of the 20 day average volume?

Answer 1

It's not enough just to check if your order doesn't exceed 10% of the 20 day average volume. I'll quote from my last answer about NSCC illiquid charges:

You may still be assessed a fee for trading OTC stocks even if your account doesn't meet the criteria because these restrictions are applied at the level of the clearing firm, not the individual client.

This means that if other investors with your broker, or even at another broker that happens to use the same clearing firm, purchase more than 5 million shares in an individual OTC stock at the same time, all of your accounts may face fees, even though individually, you don't exceed the limits.

The NSCC issues a charge to the clearing firm if in aggregate, their orders exceed the limits, and the clearing firm usually passes these charges on to the broker(s) that placed the orders. Your broker may or may not pass the charges through to you; they may simply charge you significantly higher commissions for trading OTC securities and use those to cover the charges.

Since checking how the volume of your orders compares to the average past volume, ask your broker about their policies on trading OTC stocks. They may tell you that you won't face illiquid charges because the higher cost of commissions covers these, or they may give you specifics on how to verify that your orders won't incur such charges. Only your broker can answer this with certainty.