An overview of Over the Counter Trading (OTC) in India

Over-the-counter (OTC) trading is to trade financial3)      Sponsorship of companies
instruments such as stocks, bonds, commodities or4)      Trading done in share certificates
derivatives directly between two parties. It is an5)      Weekly Settlement Cycle
electronic stock exchange based in India that is6)      Short Selling
comprised of small- and medium-sized firms looking to7)      Demat trading through National Securities
gain access to the capital markets. Like electronicDepository Limited for convenient paperless trading
exchanges in the U.S. such as the NASDAQ, there is8)      Tie-up with National Securities Clearing
no central place of exchange and all trading is doneCorporation Ltd for Clearing.
through electronic networks.OTC Exchange Of India designed trading in debt
 instruments commonly known as PSU bonds and also
In the U.S., over-the-counter trading in stock is carriedin the equity shares of unlisted companies.Some of the
out by market makers that make markets in OTCleading financial institutions of India that co-promote the
Bulletin Board OTCBB and Pink Sheets securities. TheOver-the-Country Exchange of India are like:
OTC Bulletin Board or OTCBB is an electronicUnit Trust of India
quotation system in the United States that displaysICICI
real-time quotes, last-sale prices, and volumeIndustrial Development Bank of India
information for many over-the-counter (OTC) equitySBI Capital Markets Limited
securities that are not listed on the NASDAQ stockIndustrial Finance Corporation of India
exchange or a national securities exchange. PinkLife Insurance Corporation of India
Quote, informally known as the Pink Sheets, is anCanbank Financial Services Limited
electronic quotation system operated by Pink OTCGeneral Insurance Corporation of India & its
Markets that displays quotes from broker-dealers forsubsidiaries
many over-the-counter securities. These quotes wereReasons for OTCEI
printed on pink colored paper by the National QuotationA successful market for technology & growth
Bureau.companies has to :
 1) Demonstrate an understanding for new technology
The first electronic OTC stock exchange in Indiaand concepts
was established in 1990 as a Section 25 company2) Provide capital formation opportunities for young
under the Company’s Act 1956 and got recognizedcompanies without a track record
by the Securities Contracts Regulation Act, 1956 as a3) Be national in order to reach and service
stock exchange to provide investors andentrepreneurs and investors
companies with an additional way to trade and4) Enable access to a wide spectrum of financial
issue securities. This was the first exchange in India tointermediaries
introduce market makers, which are firms that hold5) Be cost effective for issuers
shares in companies and facilitate the trading of6) Provide an exit route to venture capital &
securities by buying and selling from other participantsprivate equity funds for their investments    7)
OTCEI was set up to access high-technologyAdopt state of art trading systems and practices in
enterprising promoters in raising finance for newtune with international norms
product development in a cost effective manner and8) Be well regulated to promote transparent and fair
to provide transparent and efficient trading system tomarket practices
the investors.OTCEI, by virtue of its unique position, is well suited to
 service the requirements of these companies, making
OTC Exchange Of India introduced certain newit the natural choice for the emerging technology and
concepts in the Indian trading system:growth stocks. In fact, consumer favorites like VIP
1)      screen based nationwide trading known asAdvanta, Sonora tiles and Brilliant Mineral Water are
OTCEI Automated Securities Integrated System ormade by high growth companies that have benefited
OASISby listing on OTCEI.
2)      Market Making