The top executives of the promoters are on the Board of Directors of the OTCEI.

The operations are supervised by SEBI and the Government of India. Participants in OTCEI Market The various participants in the OTCEI are Members and Dealers appointed by OTCEI These members and dea"ers appointed by the OTCEI may act as bro#ers and serve as mar#et ma#ers. $ar#et ma#in% is a process of ma#in% t&o &ay 'uotes( i.e.( buy as &e"" as se"" 'uotes for the same scrip by the spons or. The maximum permissib"e spread bet&een the buy and se"" is !)*. Compu"sory mar#et ma#in% has to be underta#en by the sponsor of the scrips for a minimum period of !+ months from the date of pub"ic tradin%. ,t the end of !+ months( the sponsor may &ithdra& from mar#et ma#in% functions( provided an a"ternate compu"sory mar#et ma#er has been assi%ned for the scrip. The sponsor &i"" arran%e one or more member-dea"er to ma#e mar#et in the scrip sponsored by it( #no&n as ,dditiona" $ar#et $a#er. The compu"sory and additiona" mar#et ma#er must ho"d at"east .* of pub"ic offerin% bet&een themse"ves for the purpose of mar#et ma#in%. The members( in addition( carry out the vita" function of sponsorship. The sponsorship invo"ves
a/ b/ c/ d/ e/ f/

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,ppraisin% a company at its pro0ect. Certifyin% to OTCEI the investment &orthiness of the company and its pro0ect. 1a"uin% the shares of the company( Obtainin% %overnmenta" c"earances for the issue of shares. $ana%in% the pub"ic issue of securities. Servicin% as a mar#et ma#er in the issued scrip for at"east three years from the date of commencement of trade.

The member of OTCEI may be an institution( a ban#in% subsidiary( a merchant ban# or a finance company( (approved by SE2.

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Companies, whose securities are listed on OTCEI Every company desirous of "istin% &ou"d have to %et sponsored by a member of the OTCEI. Investors who trade ha the OTCEI Re istrar who! 5eeps custody of share certificates. $aintains 6e%ister of $embers.

"# $ettlement %ank

It c"ears the payment bet&een counters.

&# $E%I and 'overnment which e(ercises an overall supervision on OTCEI Tradin in OTC E(chan e

Every investor is re'uired to re%ister &ith OTC prior to tradin%. The investor re%istration is re'uired to be done on"y once and is va"id for tradin% on any OTC counter in the country and in any scrip. The re%istration is( at present( done free of cost. The purpose of investor re%istration is to faci"itate computerised tradin%. 7or buyin% and se""in% shares on OTC( an investor needs the I81EST OTC C,6D &hich can be obtained from any OTC counter free of any char%e 0ust on fi""in% the app"ication form. $teps Involved in %uyin )$ellin $crips
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2a"# into any convenient OTC counter. The 9TI OTC Scan at each dea"er:s counter continuous"y disp"ays the best buy and se"" 'uotes offered by mar#et ma#ers and a"so a"" other mar#et re"ated information. ,"" 'uotes and transactions are entered in the Centra" OTC computer &hich can be accessed by any dea"er:s computer( throu%h te"ephone "ines &ith modems. See the price of shares on the 9TI OTC scan <at the counter. Decides to buy-se"".

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,s# counter operator to dea" on your beha"f. Dea" %ets confirmed automatica""y at the best price. In case of buyin%
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$a#e che'ues for payment. Get the counter receipt ?C6/. The C6 is tradab"e and contains a"" information &hich appears on a share certificate. 6eturn C6 &hen che'ue is c"eared. ..... Co""ect fina" C6 &ithin > days.

In case o* $ellin
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Give C6 and Transfer Deed ?TD/ to counter. 6eceive Sa"es Confirmation S"ip. 6eturn &hen C6 and TD are c"eared and co""ect che'ue.

Depository $ystem The OTCEI:s uni'ue depository system enab"es convenient and :faster sett"ement for investors. The OTCEI:s depositors transfer de"ivery e"ectronica""y to the purchaser as soon as the trade is comp"eted. Share certificates are not de"ivered to the purchaser. Their movement in a nationa" mar#et is &rou%ht &ith ris# and operationa" .de"ays. The OTCEI:s depository system minimises the possibi"ities of bad de"iveries on the exchan%e by ensurin% the va"idity of the se""er:s transfer deed at the time of transfer as on the other exchan%es. The sett"ement on the OTC exchan%e ta#es p"ace on a ro""in% basis t&o days after the day of trade. This means faster payments to the se""er and faster de"iveries to the buyer. The OTC Exchan%e offers a &ho"e "ot of investor services( name"y<
?i/ Sp"ittin%-conso"idation ?ii/ Transfer-nomination ?iii/

of 9C6s ?Counter 6eceipt/

Chan%e in 0oint ho"der:s names

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Exchan%e of 9C6 for<share certificate and vice versa

The OTC Counter is tru"y a sin%"e &indo& for investments. 7or each of the above services re'uested by investors( an ,pp"ication ,c#no&"ed%ement S"ip ?,,S/ &i"" be issued( nomina" service char%es may be "evied and the services &i"" be comp"eted &ithin reasonab"e time specified by OTCEI. +istin on OTC E(chan e The OTC Exchan%e can "ist companies &ith issued capita" from 6s. 4) "a#hs up to 6s. 3. crores. The e"i%ibi"ity for "istin% are
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The issue si@e shou"d be a minimum( of 6s. 3) "a#hs or 3.* of the paid up capita"( &hichever is hi%her. Companies en%a%ed in hire purchase-finance-"easin%( amusement par#s( etc.( sha"" not be e"i%ib"e for "istin% on the OTC exchan%e. . C o m p a n i e s c o v e r u n d e r t h e $ 6T 9 - 7 E $ , m a y b e " i s t e d o n O T C e x c h a n % e . I f t h e y satisfy "istin% %uide"ines as on other reco%nised stoc# exchan%es. The minimum number of counters for co""ection of app"ication forms for issues of securities sha"" be four. The company &i"" pay one time "istin% fee of 6s. =())) and annua" "istin% fee of 6s. ).).A-B of their paid<up capita" inc<aSe=fe'uitC sh< ara <dfar).*of the %ross amount issued in case of any other security.

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,dvanta es! -or the Investors

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The investors have access to current prices of a"" scripts bein% traded on the :9TI scan: disp"ay. This ensures transparency in tradin%. In a stoc# exchan%e there is no transparency in the transaction and the investors do not #no& &hat price the script &as bou%ht and so"d at. Duic# sett"ements and definite "i'uidity is ensured to investors. It is a pre verified trade and therefore no bad de"iveries are possib"e. $ar#et ma#ers ensure price stabi"ityE "i'uidity and depth of the mar#et. Transaction is possib"e from remote "ocation of the country on a nationa" net &or# exchan%e. ,utomatic re%istration of shares "od%ed by an individua" upto of its tota" paid up e'uity is possib"e.

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It is a foo" proof system &here manipu"ations &i"" be minima" dea"s &i"" be matched on the computer screen on the

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-or the Company Sma"" and medium si@ed companies &ou"d be ab"e to raise re'uired capita" throu%h OTCEI. The cost of pub"ic issue is "o&. The company %ets hi%h visibi"ity at nationa" "eve". Dependab"e source of funds throu%h structured bou%ht out dea"s at reasonab"e prices is possib"e. The companies "isted on OTC &ou"d be sub0ected to "o& income tax. The cumbersome process of obtainin% the "istin% <of the share may not be there for "istin% on OTC Exchan%e. Companies &hich re'uire "istin% on OTCEI have to offer !)* of the share capita" for "istin% as a%ainst =)* bein% the offer to the pub"ic in other stoc# exchan%es. Stron% support for the share in secondary mar#et throu%h the presence of committed mar#et ma#ers is avai"ab"e.

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Operational .i hli ht

The OTCEI has been promoted to address the prob"em faced by medium si@ed companies and investors at "ar%e. It has set<up a modern

e"ectronic stoc# exchan%e to evo"ve cost effective so"ution to these prob"ems. It is no& operatin% in .; cities in !B states. The OTCEI is movin% to&ards settin% hi%her standards to the benefit of the corporate and the investin% community in India. The turnover in OTCEI durin% 3)))<3))! &as 6s. !3= crore.
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Recent Trends SEBI re"axed norms for "istin% on the OTCEI durin% $arch !BB.. 7inance and "easin% companies &ere a""o&ed to %et "isted on OTCBI. The minimum post issue capita" to be offered to the pub"ic to enab"e "istin% &as "o&ered from ;) per cent to 3. per cent. In ,pri"( !BB.( OTCEI modified its %uide"ines to a""o& "istin% of finance companies &ith more strin%ency. The minimum issued capita" &as increased from .6s.4) "a#h to 6s.! crore for finance companies. , three year trac# record of profitabi"ity &as made compu"sory before "istin% ta#esp"ace. OTCEI sponsor of these companies shou"d ho"d at"east !)* of the pub"ic offer as mar#et ma#in% inventory as a%ainst . per cent for other companies. To faci"itate offers for sa"e of bou%ht out dea"s( OTCEI chan%ed its %uide"ines in Fanuary !BB=. The revised %uide"ines did a&ay &ith the re'uirement of ma#in% an offer for sa"e of the entire bou%ht out dea" to the pub"ic( except the mar#et ma#in% inventory. The offerer can no& offer a minimum 3. per cent of the bou%ht out dea"s to the pub"ic. ,t the same time( the ratio of invo"vement of OTCEI members to non<OTCEI members has been brou%ht do&n from =) ;) to !) B). The ne& %uide"ines issued by the SEBI stated that any company &antin% to ma#e a pub"ic issue shou"d have a trac# record of dividend payment for at "east three years immediate"y preceedin% five years before ma#in% the pub"ic issue. If the companies do not satisfy this re'uirement( then they must at"east %et their pro0ect appraised by a financia" institution or a G nationa"ised ban# &hich &ou"d participate in the pub"ic issue to the extent of at "east !) per cent of the tota" out"ay in the form of e'uity or "on% term debt. 2ith a vie& to revie&in% the &or#in% of the OTCEI and ma#in% recommendations for its further improvement( SEBI appointed an ei%ht member committee under the chairmanship of Dr. S. ,. Dave on ,pri" !>( !BB=.

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The recommendations of the Dave Committee are as fo""o&s The companies &hich are unab"e to ma#e pub"ic issue as a conse'uence of the above %uide"ines be a""o&ed &ith some chec#s. The companies &hich do not satisfy the criteria shou"d be a""o&ed to %et "isted on the OTCEI provided they appoint a sponsor and t&o mar#et ma#ers to the issue. Companies &hich %et de"isted from re%iona" stoc# exchan%es shou"d be a""o&ed to "ist on OTCEI since shareho"ders of de"isted companies do not have a p"atform to off"oad their ho"din%s. These companies shou"d( ho&ever( be treated under a specia" cate%ory on the OTCEI. The companies discussed above shou"d be a""o&ed "istin% on the OTCEI &ith a minimum "oc# in period of three years. ,fter three years these companies may either to choose to remain on the OTCEI or see# "istin% on other stoc# exchan%es. The cei"in% of 6s. 3. crore on the e'uity capita" of a company see#in% "istin% on the OTCEI be removed. The current ro""in% sett"ement system of three days shou"d be increased to five years. The committee stressed upon the need of increased invo"vement of the promoters of OTCEI. There is no si%nificant performance in the OTCEI no&adays.

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