Page 45 - DCOM504_SECURITY_ANALYSIS_AND_PORTFOLIO_MANAGEMENT

Security Analysis and Portfolio Management

Notes Two Ways of Making a Public Offer

Another unique feature of OTCEI is its 'two ways' of making a public offer. Under 'direct offer',
a company can of its shares directly to the public after getting them sponsored by a sponsor but
under 'indirect offer' the company has give its shares first to the sponsor who along with the
company can at a later and convenient time make a to offer.

Faster Transfers and Trading without Shares

OTC trading also provides for transfer of shares of Registrars, up to a certain percentage per
folio. This assists in faster transfers. The concept of immediate settlement makes it better for the
investors, who will not make with share certificates but with a different tradable document
called counter receipt (CR). However, an investor can always exercise his right of having a share
certificate his right of having a share certificate by surrendering the CR and again exchanging
share certificate for CR when he wants to trade. There will be a custodian who will provide this
facility along in a settler who will do the signature verification and CR validation.

Investor Registration

Yet another feature of OTCEI is investor registration, introduced for the first time in India. The
investor registration required to be done only once and is valid for trading on any OTC counter
in the country in any scrip. The purpose of the investor registration is to facilitate computerized
trading. It also provides greater safety of operations the investors.

Trading Mechanism

An investor can buy and sell any listed scrip at any OTC Exchange counter. Similarly he can sell
any listed scrip at by OTC Exchange counter. The investor can also make an application for
services like transfer of shares, splitting and consolidation of shares, nomination and revocation
of nomination, registering power of attorney, transmission shares and charge of holder's name,
etc. The parties involved in trading on OTC are Investor, Counter, Settler Registered Custodian,
Company and Bank.
The trading documents mainly involved in OTC Exchange transactions are

1. Temporary Counter Receipt (TCR)
2. Permanent Counter Receipt (PCR),
3. Sales Confirmation Slip (SCS),
4. Transfer Deed (TD),

5. Services Application Form (SAF),
6. Application Acknowledgement Slip (AAS) and
7. Deal Form (DF)

Customer Purchase (at Market Makers Counter)

Each market maker will be displaying the quantum of stock he is holding, the market lots and
bid and offer prices. Customers will place the order and deliver the cheque. Counter will
prepare TD, obtain all details of the buyers including signature on the transfer deed and forward
to registrars for updating. Simultaneously, cheques received from the customer will be sent for
collection.

40 LOVELY PROFESSIONAL UNIVERSITY