An overview of Over the Counter Trading (OTC) in India
Over-the-counter (OTC) trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is an electronic stock exchange based in India that is comprised of small- and medium-sized firms looking to gain access to the capital markets. Like electronic exchanges in the U.S. such as the NASDAQ, there is no central place of exchange and all trading is done through electronic networks.
In the U.S., over-the-counter trading in stock is carried out by market makers that make markets in OTC Bulletin Board OTCBB and Pink Sheets securities. The OTC Bulletin Board or OTCBB is an electronic quotation system in the United States that displays real-time quotes, last-sale prices, and volume information for many over-the-counter (OTC) equity securities that are not listed on the NASDAQ stock exchange or a national securities exchange. Pink Quote, informally known as the Pink Sheets, is an electronic quotation system operated by Pink OTC Markets that displays quotes from broker-dealers for many over-the-counter securities. These quotes were printed on pink colored paper by the National Quotation Bureau.
The first electronic OTC stock exchange in India was established in 1990 as a Section 25 company under the Company's Act 1956 and got recognized by the Securities Contracts Regulation Act, 1956 as a stock exchange to provide investors and companies with an additional way to trade and issue securities. This was the first exchange in India to introduce market makers, which are firms that hold shares in companies and facilitate the trading of securities by buying and selling from other participants OTCEI was set up to access high-technology enterprising promoters in raising finance for new product development in a cost effective manner and to provide transparent and efficient trading system to the investors.
OTC Exchange Of India introduced certain new concepts in the Indian trading system:
1) screen based nationwide trading known as OTCEI Automated Securities Integrated System or OASIS
2) Market Making
3) Sponsorship of companies
4) Trading done in share certificates
5) Weekly Settlement Cycle
6) Short Selling
7) Demat trading through National Securities Depository Limited for convenient paperless trading
8) Tie-up with National Securities Clearing Corporation Ltd for Clearing.
OTC Exchange Of India designed trading in debt instruments commonly known as PSU bonds and also in the equity shares of unlisted companies.Some of the leading financial institutions of India that co-promote the Over-the-Country Exchange of India are like:
Unit Trust of India
ICICI
Industrial Development Bank of India
SBI Capital Markets Limited
Industrial Finance Corporation of India
Life Insurance Corporation of India
Canbank Financial Services Limited
General Insurance Corporation of India & its subsidiaries
Reasons for OTCEI
A successful market for technology & growth companies has to :
1) Demonstrate an understanding for new technology and concepts
2) Provide capital formation opportunities for young companies without a track record
3) Be national in order to reach and service entrepreneurs and investors
4) Enable access to a wide spectrum of financial intermediaries
5) Be cost effective for issuers
6) Provide an exit route to venture capital & private equity funds for their investments 7) Adopt state of art trading systems and practices in tune with international norms
8) Be well regulated to promote transparent and fair market practices
OTCEI, by virtue of its unique position, is well suited to service the requirements of these companies, making it the natural choice for the emerging technology and growth stocks. In fact, consumer favorites like VIP Advanta, Sonora tiles and Brilliant Mineral Water are made by high growth companies that have benefited by listing on OTCEI.
In the U.S., over-the-counter trading in stock is carried out by market makers that make markets in OTC Bulletin Board OTCBB and Pink Sheets securities. The OTC Bulletin Board or OTCBB is an electronic quotation system in the United States that displays real-time quotes, last-sale prices, and volume information for many over-the-counter (OTC) equity securities that are not listed on the NASDAQ stock exchange or a national securities exchange. Pink Quote, informally known as the Pink Sheets, is an electronic quotation system operated by Pink OTC Markets that displays quotes from broker-dealers for many over-the-counter securities. These quotes were printed on pink colored paper by the National Quotation Bureau.
The first electronic OTC stock exchange in India was established in 1990 as a Section 25 company under the Company's Act 1956 and got recognized by the Securities Contracts Regulation Act, 1956 as a stock exchange to provide investors and companies with an additional way to trade and issue securities. This was the first exchange in India to introduce market makers, which are firms that hold shares in companies and facilitate the trading of securities by buying and selling from other participants OTCEI was set up to access high-technology enterprising promoters in raising finance for new product development in a cost effective manner and to provide transparent and efficient trading system to the investors.
OTC Exchange Of India introduced certain new concepts in the Indian trading system:
1) screen based nationwide trading known as OTCEI Automated Securities Integrated System or OASIS
2) Market Making
3) Sponsorship of companies
4) Trading done in share certificates
5) Weekly Settlement Cycle
6) Short Selling
7) Demat trading through National Securities Depository Limited for convenient paperless trading
8) Tie-up with National Securities Clearing Corporation Ltd for Clearing.
OTC Exchange Of India designed trading in debt instruments commonly known as PSU bonds and also in the equity shares of unlisted companies.Some of the leading financial institutions of India that co-promote the Over-the-Country Exchange of India are like:
Unit Trust of India
ICICI
Industrial Development Bank of India
SBI Capital Markets Limited
Industrial Finance Corporation of India
Life Insurance Corporation of India
Canbank Financial Services Limited
General Insurance Corporation of India & its subsidiaries
Reasons for OTCEI
A successful market for technology & growth companies has to :
1) Demonstrate an understanding for new technology and concepts
2) Provide capital formation opportunities for young companies without a track record
3) Be national in order to reach and service entrepreneurs and investors
4) Enable access to a wide spectrum of financial intermediaries
5) Be cost effective for issuers
6) Provide an exit route to venture capital & private equity funds for their investments 7) Adopt state of art trading systems and practices in tune with international norms
8) Be well regulated to promote transparent and fair market practices
OTCEI, by virtue of its unique position, is well suited to service the requirements of these companies, making it the natural choice for the emerging technology and growth stocks. In fact, consumer favorites like VIP Advanta, Sonora tiles and Brilliant Mineral Water are made by high growth companies that have benefited by listing on OTCEI.
