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OTCEI

Over The Counter Exchange of


NEERAJ CHITKARA
India
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.
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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.
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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
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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
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;
Cont
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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;
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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;
Cont
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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
Procedure for listing
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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.
Application for listing
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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.



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Listing Fee

The fee structure for listing is as


follows:
Initial Listing Fees Rs. 7,500
Annual Listing Fees
Paid-up capital Amount of Annual Fees
Upto Rs. 3 crore Rs. 7500/-
Rs. 3 crore- Rs. 10 crore Rs. 15000/-
Rs. 10 crore- Rs. 20 crore Rs. 25000/-
Rs. 20 crore- Rs. 50 crore Rs. 40000/-
Rs. 50 crore- Rs. 100 crore Rs. 85000/-
Above Rs. 100 crore Rs. 1000 for every Rs. 10 crore
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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
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.
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.
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.
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.
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)