OVER-THE-COUNTER EXCHANGE OF INDIA (OTCEI)

BY: ROHIT PAWAR MBA(SEM) 008

WHAT DOES OVER-THE-COUNTER MEANS????

It is a way of trading securities otherwise than on an organized stock exchange. Under this counter system is followed in which the securities are traded on these counters which are scattered over different location ,region across the country and with the help of communication through phone ,fax and computer. Communication through computer links every broker and helps arrive at a price and allows investor to select among the competing market maker. Market maker is the one who offer two way quotation (buy/sell). OTC thus is a floorless securities trading system equipped with electronic or computer network through which nationally and internationally scattered buyer and seller can conduct business.

WHY OTCEI WAS FORMED??

Stock exchange functions as single door market in which the securities of a company in their varied sizes are traded in a same trading hall often called as RING TRADING SYSTEM. When the securities are traded in a ring or hall, it creates a situation in which only big and large companies receive all the attention with small companies being neglected or un-noticed. Further, this creates a situation in which non-traded companies that greatly jeopardize liquidity of small investor. Hence, small investor face problem of liquidity, delays in payment and has uncertainty about what price their shares are bought and sold. This also make it difficult for the small investor to raise capital. It means that in whole of India, the stock market option for small investor lack with main attention only to the large companies on BSE and NSE which have entry threshold of Rs 10 Cr equity base.

OTCEI FORMATION IN 1990

Various problems faced by the small and medium scale investor across the country led to the incorporation of OTCEI in October 1990 under Companies Act, 1956 and it was recognized as stock exchange under Sec. 4 of Securities Contract (Regulation) Act, 1956. A group of firms agreed to co-operate such as UTI, ICICI, IDBI, LIC, IFCI, SBI capital markets ad Canbank financial services Ltd promoted the formation of OTCEI. OTCEI was recognized as stock exchange lately in the year 1992. Vasundra Rasayan was the Ist company to get listed on OTCEI on july, 1992.

FORMATION:

HOW OTCEI DIFFERENT FROM REGULAR STOCK EXCHANGE

OTCEI is promoted by financial institution, while SE are formed by brokers of exchange. NUMBER: OTCEI is the only one SE with nationwide reach, while there are 23 independent SE and 1 NSE. LISTING: Companies with ESC between 30 Lac to 25 Cr can become eligible to get listed on OTCEI while, regular SE allows Companies with ESC above 3 Cr. TRADING: OTCEI Ist time introduced screen based ringless trading while, regular SE is done by ring trading.

HOW OTCEI HELP SOLVING PROBLEMS OF SMALL INVERTORS

Strengthen the small investor by offering them two way quotation. It provide a source of valuation of securities. OTCEI facilitates small companies to raise funds from capital markets in cost effective manner as it does not involve any floatation coat. FLOATATION Cost are the cost that are charged by the investor in form of: 1. Legal fees 2. Commission to broker 3. Charges of underwriter (underwriter are those people who prepare underwriting which is a legal document of agreement between company and financial institution)

OTCEI GEOGRAPHICAL LOACTION.

Unlike a conventional stock exchange, an Over-The-Counter (OTC) exchanges has no particular geographical location with a trading floor It is a market system based on collective arrangements of counter spread across the country, connected by telephone lines and computer networks. A person can walk into a counter, watch the price scan on the computer screen, take decision and strike deals with another person far away fro him, listening at the other computer counter. It is just like a shopping of the securities.

OTCEI FEATURES..
NATIONWIDE TRADING COMPULSARY INVERTOR REGISTRATION RINGLESS TRADING EXCLUSIVE LISTING TRANSPARENT COMPUTERIZED TRADING PRICE DISPLAY MOU WITH NASDAQ AUTHORIZED DEALERS TRADING FOR THE UNLISTED COMPANIES TRADING IN DERIEVATIVES TECHNOLOGIES TRADING SERVICES

WHAT TYPE OF SECURITIES ARE TRADED IN OTCEI???

LISTED EQUITY

LISTED DEBTS
GLITS PERMITTED SECURITIES LISTED MUTUAL FUNDS

PLAYERS INVOLVED IN OTCEI TRADING.

INVESTOR ISSUER MEMBERS AND DEALERS (Sponsorship) REGISTRAR AND CUSTODIAN CLEARING BANK MONITORING AGENCIES

STEPS OF TRADING ON OTCEI.

ISSUE OF COUNTER RECIEPTS
TRANSFER COMPILATION SELLING SECURITIES COUNTER DETAILS CONSOLIDATED STATEMENTS

OTCEI FUNCTIONS
OTCEI named itself as THE CONTEMPORARY AND COMPETITIVE EXCHANGE OF INDIA thereby emphasizing on the role as providing:

1. Weekly statements
2. Revamping the trade system 3. Technology

SOME OF THE OTCEI COUNTER NEAR-BY:

TIME CAPITAL LTD, Raj Nagar District Center GHAZIABAD SAFFRON HOLDINGS LTD, Vikas Deep Building Laxmi Nagar NEW DELHI And many more.