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

3 Min.

The Over-The-Counter Exchange of India (OTCEI) is an electronic stock exchange that caters to small- and mid-cap companies. The main objective of OTCEI is to provide a platform for these smaller companies to raise capital, which they may not be able to do at national exchanges due to the strict requirements. To ensure that it is suitable for small- to medium-sized companies, the OTCEI has specific capitalization rules that prevent larger companies from being listed. The key players in the OTCEI include brokers, market makers, custodians, and transfer agents.

Basics

India's OTCEI is an electronic stock exchange where small and medium-sized firms seek access to global capital markets, including U.S. electronic exchanges like NASDAQ. Trading takes place exclusively through electronic networks without a centralized physical location.

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

The OTCEI, headquartered in Mumbai, India, operates exclusively through computer networks. It holds legal recognition under India's Securities Contract Regulation Act, granting equal status to its listed stocks alongside those on other Indian exchanges.

Established in 1990, the OTCEI emerged to provide an alternative platform for securities trading and issuance, mainly aimed at small Indian companies facing challenges in raising capital through conventional national stock exchanges due to stringent listing requirements.

Unlike national exchanges, the OTCEI offers more flexible regulations, enabling smaller companies to access essential capital for expansion. The ultimate goal is for these companies to grow to a level where they can meet the stringent requirements of national exchanges, prompting them to transition away from the OTCEI.

Technological advancements enhancing electronic trading platforms have narrowed the distinctions between traditional exchanges and over-the-counter (OTC) networks, offering significant advantages to small and medium-sized enterprises.

Unique Attributes of India's OTCEI

The Over-The-Counter Exchange of India (OTCEI) stands out with distinctive characteristics that foster the growth of small and medium-sized enterprises. Here are its notable features:

  1. Stock Exclusivity: OTCEI prohibits the listing of stocks available on other exchanges, ensuring exclusivity for listed securities.
  2. Minimum Capital Mandate: Firms seeking listing must maintain a minimum issued equity capital of 30 lakh rupees (approximately $40,000).
  3. Limits on Large Companies: Corporations with issued equity capital exceeding 25 crore rupees ($3.3 million) are ineligible for OTCEI listing.
  4. Member Capital Requirement: Exchange members are obligated to uphold a base capital of 4 lakh rupees ($5,277) for continued listing.

OTCEI Listing Criteria

The OTCEI streamlines listing for small to mid-cap companies, albeit with specific prerequisites. These conditions encompass securing sponsorship from OTCEI members and appointing two market makers. Moreover, listed firms must maintain their status for at least three years, with promoters holding at least 20% of issued equity capital throughout this period.

OTCEI Transaction Dynamics

Dealers play important roles as brokers and market makers in OTCEI transactions. They execute trades on behalf of buyers and sellers. As market makers, their responsibility extends to ensuring share availability for transactions while maintaining price equilibrium through supply and demand dynamics. Complementing dealers are custodians, essential for administering the OTCEI efficiently. Their duties encompass document validation, storage, and facilitation of daily clearing transactions. Completing this ecosystem are registrars and transfer agents entrusted with the accurate transfer and allotment of shares.

Conclusion

The OTCEI is a pivotal platform for small and mid-cap companies to access global capital markets. Its unique features and streamlined listing criteria facilitate growth for emerging enterprises. Dealers, custodians, and registrars, along with transfer agents, ensure efficient operations within the OTCEI's transaction ecosystem. This exchange is vital in providing opportunities for smaller businesses to access the capital needed for growth and prosperity.

Over-The-Counter Exchange of India (OTCEI)
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