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Unit 1: Introduction to Capital Market

(CD). The capital market segment will cover trading in equities, convertible/non-convertible Notes
debenture and hybrids; this segment has not been made operational. The existing permissible
repo-transactions in the 91 and 364 days treasury bills can now be routed through the NSE. This
move is expected to provide a boost to trading in the secondary market for debt instruments.

1.3.10 Over the Counter Exchange of India (OTCEI)

Indeed, in the mid-eighties itself, the G.S. Patel Committee on Stock Exchange reforms and the
Abid Holi Committee on Capital Markets had recommended the creation of a second tier stock
market that will offset some of the problems of present stock exchanges. Over The Counter
Exchange of India (OTCEI) has promoted by UTI, IDBI, IFCI, LIC, GIC, SBI Capital Market and
Canbank Financial Services as a non-making company under Section 25 of the Companies Act,
1956. The OTCEI is a recognized Stock Exchanges under Section 4 of the Securities Contracts
(Regulation) Act, 1956. Hence companies listed on the OTC Exchange enjoy the same status as
companies listed on any other stock exchanges in the country as regards to interest rates on
borrowings, etc.
OTC Exchange of India has picked the model from the NASADQ system (National Association
of Security Dealers-Automated Quotations) prevalent in the United States of America.
Modifications suited to Indian conditions been adopted OTC in America was an offshoot of their
government's efforts to regulate the unlisted securities act. The Indian version of NASD-National
Associations of Securities Dealers is what is called OTC Exchange of India. Unlike in the regular
exchange, listing on OTCEI is a national listing from day one. Wherever and whenever countries
start operating in the exchange they can trade in all the scripts of OTCEI. Separate listing in those
regular places is not needed at all.

The unique features of OTCEI are as under:

Ringless Trading
OTCEI exchange has eliminated the traditional trading ring with a view to have greater
accessibility to the factors. Trading will instead take place through a network of computers
(screen-based) of OTC dealers located several places within the same city and even across cities.
These computers allow dealers to quote, query and act through a central OTC computer using
telecommunication links. Investors can walk into any of centres of members and dealers and see
the quote display on the screen, decide to deal and conclude the fraction.

National Network

Unlike other stock exchanges, the OTC Exchange will have a nation wide reach, enabling widely
dispersed ring across the cities, resulting in greater liquidity. Companies, thus, have the unique
benefit of nationwide listing trading of their scrips by listing at one exchange, the OTC Exchange.

Totally Computerized

All the activities of the OTC trading will be computerized, making for a more transparent, quick
and complained market.

Exclusive List of Companies

The OTC Exchange will not list and trade in companies listed on any other stock exchange. It
will, therefore, an entirely new set of companies 'sponsored' by members of the OTC Exchange.
However, it has recently viewed some 25 companies already listed on other exchanges to list on
OTCEI.

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