What Is the Over-The-Counter Exchange of India (OTCEI)?

What Is the Over-The-Counter Exchange of India (OTCEI)?

Let me explain what the Over-The-Counter Exchange of India (OTCEI) is. It's an electronic stock exchange in India made up of small- and medium-sized firms that want to tap into overseas capital markets, including electronic ones in the U.S. like NASDAQ. You won't find a central trading floor here—everything happens through electronic networks.

Key Takeaways

Here's what you need to know about the OTCEI. It's an Indian electronic stock exchange focused on small- and mid-cap companies. The main goal is to help these smaller firms raise capital, which they can't do on national exchanges because they don't meet the requirements. The OTCEI sets specific capitalization rules that fit small- to medium-sized companies while keeping larger ones out. The main players include brokers, market makers, custodians, and transfer agents.

Understanding the Over-The-Counter Exchange of India (OTCEI)

The OTCEI is headquartered in Mumbai, India, and runs entirely on a computer network. It's recognized under India's Securities Contract Regulation Act, so stocks listed here get the same benefits as those on other Indian exchanges. I should note that it was set up in 1990 to give investors and companies another option for trading and issuing securities. This came about because small companies in India struggled to raise capital on mainstream national stock exchanges—they just couldn't meet the tough listing rules.

With less rigid rules than national exchanges, the OTCEI lets these small companies get the capital they need to expand. The idea is that once they grow enough to qualify for national exchanges, they'll switch over and leave the OTCEI. Advances in technology have improved electronic trading platforms, narrowing the gap between traditional exchanges and OTC networks, which really helps small- and medium-sized companies.

Features of the Over-The-Counter Exchange of India (OTCEI)

The OTCEI stands out with features that make it unique in India and a real booster for small- to medium-sized companies. For instance, stocks listed on other exchanges can't be listed here, and vice versa—stocks on the OTCEI stay exclusive to it. There's a minimum issued equity capital requirement of 30 lakh rupees, about $40,000. Companies with more than 25 crore rupees in issued equity capital, around $3.3 million, aren't allowed to list, keeping the focus on smaller players. Members also need to maintain a base capital of 4 lakh rupees, or $5,277, to stay on the exchange.

Over-The-Counter Exchange of India (OTCEI) Listing Requirements

Listing on the OTCEI is easier for small- to mid-cap companies, but there are still requirements you have to meet. Companies need sponsorship from OTCEI members and must have two market makers. Once listed, they can't delist for at least three years, and promoters have to hold onto 20% of the issued equity capital for a minimum of three years.

Over-The-Counter Exchange of India (OTCEI) Transactions

Transactions on the OTCEI center around dealers, who act in key roles like brokers and market makers. As a broker, a dealer handles trades for buyers and sellers. As a market maker, they ensure shares are available and keep prices reasonable by balancing supply and demand. Beyond dealers, there are custodians who handle administrative tasks like validating and storing documents, plus facilitating daily clearing. Finally, registrars and transfer agents make sure shares are properly transferred and allotted.