2. NEERAJ CHITKARA
OTCEI
Over the counter exchange of India was started in
1992. The OTCEI was started with the objective
of providing a market for the smaller companies
that could not offered the listing fees of the large
exchange and didn't fulfill the minimum capital
requirement of listing.
3. NEERAJ CHITKARA
OBJECTIVES
The aim at creating a fully decentralized and
transport market. Over the counter exchange
means trading across the counter in scrip.
The counter refers to the location of the member
or dealer of the OTCEI where the deal or trade
takes place. Every counter is treated as trading
floor for OTCEI where the investor buy or sell.
4. NEERAJ CHITKARA
PROMOTERS OF OTCEI
OTCEI is incorporated as company under section 25
of the Indian companies' act 1956.
Promoters are as followings:
• UTI
• ICICI
• IDBI
• IFCI
• LIC
• GIC
• SBI CAPITAL MARKET
5. NEERAJ CHITKARA
FEATURES OF OTCEI
• NATIONWIDE TRADING
• RINGLESS TRADING
• TOTALLY COMPUTERISED
• TRANSPARENT TRADING
• ONLY AUTHORIZED DEALERS
• TWO WAY OF MAKING A PUBLIC OFFER
• FASTER TRANSFER AND TARDING OF SHARES
• INVESTOR REGISTRATION
• TRADING IN UNLISTED EQUITY SHARES
• TRADING IN FUTURES AND OPTIONS AND
FORWARD CONTRACT ON STOCK
6. LISTING AT OTCEI NEERAJ CHITKARA
Listing Requirements
Guidelines issued by SEBI for the listing of the securities at
OTCEI are as follows:
1. The company should be a public company;
1. The minimum equity share capital of the company should be of
Rs 30 lakh, subject to a minimum public offer of 25% of equity
shares worth Rs. 20 lakhs in face value;
2. The existing companies with issued capital of Rs. 25 crore could
be listed on OTCEI, SEBI has now removed upper limit of Rs. 25
crore of issued capital and allowed all companies to list on OTCEI.
The Ministry of finance has allowed the listing of:
3. The company to be listed must must track record of paying
dividends in the previous three years;
7. Cont…
NEERAJ CHITKARA
5. Companies with issued capital of more than Rs. 3 crore have to
comply with listing requirements and guideline as applicable on
the companies listed on other stock exchanges;
6. Trading of 20% equity of public sector units that are offered for
for sale on the stock markets are allowed as permitted securities
on OTCEI.
7. Earlier it was mandatory that the companies listed on OTCEI
make a minimum public offer of 40%. This minimum
requirement of 40% have been brought down to 20% for closely-
held companies and new companies;
8. A company which listed on any other recognized stock exchange
in India is not eligible for listing on simultaneously except the
scrips of those companies will be allowed o be traded only under
permitted category on OTCEI;
9. MRTP/FERA companies may be listed on OTCEI if these satisfy
guidelines for listing on other stock exchanges;
8. NEERAJ CHITKARA
Cont…
10. A property company which is listed on any
other recognized stock exchange in the country
is eligible for listing on OTCEI simultaneously;
11. The companies which do not have track record
of paying dividends and which have not been
apprised by financial institution are also
eligible for listing on OTCEI Subject of
following two conditions;
(a) They must be sponsored by any member; and
(b)They must appoint at least two market makers to provide
continuous liquidity to the stocks;
9. Cont…
NEERAJ CHITKARA
12. Companies engaged in hire purchases, finance, leasing, amusement park,
etc. were now made eligible for listing on OTCEI provided the company
fulfill all the following conditions;
• They have paid-up capital of at leas Rs. 1 crore;
• They have track record of continuous profitability for at least past 3 years;
• The debt- equity ratio of these companies should conform to the RBI guidelines;
• The objectives of issue should also include seeking membership of OTCEI;
• The sponsor in the scrips of these companies should hold at least 10% of the public
offer as market making inventory in comparison with a minimum of 5% applicable o
other OTCEI listed companies;
• Such companies listed on OTCEI or their group/associate companies are not
permitted to make market in their own scrips;
• In case such companies have floated fixed deposits/debentures, they should obtain
investment grade rating by a rating agency
10. Procedure for listing
NEERAJ CHITKARA
The procedure adopted for the listing of shares at OTCEI is as follows:
• OTCEI appoints a member as a sponsor for the company's issue. The
sponsor appraises the project or company on various aspects, such as
technical, managerial, commercial, economical and financial. After
appraisal, the sponsor certifies the OTCEI regarding its appraisal.
• The sponsor determines the price of shares to be offered to the public,
members and dealers of OTCEI.
• The sponsor after compliance with all SEBI guidelines gets all statutory
consent.
• The sponsor registers the issue with OTCEI and makes the listing
application to the OTCEI as per rules and regulations.
• After getting the approval, the allotment is made.
• Once the allotment is over, the equity is listed and trading commences.
11. Application for listing
NEERAJ CHITKARA
After the completion of entire process of allotment and refund, the company
or the sponsor makes the application for the listing of scrips at OTCEI. The
following documents are to be attached with the application for listing:
• Listing agreement
• Certificate from auditor that the allotment letters, counter receipts and
advice-cum-refund orders have been mailed;
• A certificate from the auditor that the allotment has been made as per the
basis approved by OTCEI;
• Company's confirmation that all cheques for brokerage and underwriting
commission have directly been posted to members and dealers;
• A copy of the newspaper announcement giving the basis of allotment as
approved by OTCEI, and
• A Cheque /demand draft for the listing fee.
•
13. NEERAJ CHITKARA
PLAYERS in the OTCEI (Parties/ Participants involved in OTCEI Trading)
• Investor
• Issuer Companies
• Members and Dealers
• Market Makers
Compulsory Market Making
Additional Market Making
Voluntary Market Making
• Sponsors
• Registrars and Custodians
• Central Clearing Bank
• Settler
• Monitoring Agencies
14. NEERAJ CHITKARA
BENEFITS OF OTCEI
FOR COMPANIES:
• It will provides a method of funds raising
through capital market instruments which are
priced fairly
• In OTCEI the companies will be able to negotiate
the issue price the sponsor who will market the
issue.
• It will also help to save unnecessary issue
expenses on raising funds from capital market.
15. NEERAJ CHITKARA
BENEFITS OF OTCEI
FOR INVESTOR:
• Investment in stock will become easier. Its wide
network will bring the stock exchange to every street
corner.
• It will provide greater confidence and fidelity of
trade.
• Investor can look up the price displayed at the OTC
counter.
• It will enable transaction complete quickly.
• It also provide liquidity to investors
• It will quoted regularly to provide sufficient
opportunities for investor to exist.
• Investors may get greater sense of security.
16. NEERAJ CHITKARA
BENEFITS OF OTCEI
FOR FINANCIAL ENVIRONMENT:
• It will help spread the stock exchange operations
geographically and integrated.
• Capital investment into a national forum
• It will encourage closely held companies across
the country to boost entrepreneurship.
17. NEERAJ CHITKARA
TRADING MECHANISM OF OTCEI
An investor can buy and sell any listed scrip at
any 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 etc.
The parties involved in trading on OTC are
investor, Counter, Settler Registered Custodian,
Company and Bank.
18. NEERAJ CHITKARA
Cont…
The trading documents mainly involved in OTC Exchange transactions
are:
• Temporary Counter Receipt (TCR)
• Permanent Counter Receipt (PCR)
• Sales Confirmation Slip (SCS)
• Transfer Deed (TD)
• Service Application Form (SAF)
• Application Acknowledgement Slip (AAS) and
• Deal Form (DF)
