Capital Markets

Over the Counter Exchange of India

Over the counter exchange of India or OTCEI which is commonly known as an electronic stock exchange in India. Also, it consists of small and medium-sized companies that aim to get access to capital markets. So, this is similar to electronic exchanges in the USA in the form of Nasdaq. Also, there is no central place for exchange. While the entire trading occurs through electronic networks. 

Breakdown of OTCEI



In 1990, the first electronic exchange of India was established. Also, it was to provide companies and investors an additional way to trade and also to issue securities. Additionally, it was the first exchange in India to bring market makers. These are the firms that hold shares in companies and thereby facilitate trading securities by buying and selling. 

History of OTCEI 

OTCEI is based out in Mumbai, Maharashtra and was founded in 1990. It was formed under the companies act of 1956 and recognized by securities regulation act of 1956. For small companies, it was the first exchange along with the first screen based nationwide stock exchange.

OTCEI in India was set up to access high technology for enterprises promoters. This was for new product development in a cost-effective manner and provide an efficient and transparent way to investors. 

OTCEI was promoted by the industrial development bank of India, unit trust of India, the industrial investment and credit corporation of India, and other Institutions that are recognized stock exchange under the SCR act. Currently, OTCEI is no longer functionally exchange as it has been derecognized by the SEBI on the order dated 31st March 2015. 

In other Markets 

In worldwide and US, the OTC markets exist besides formal exchanges. For countries like the USA, this is included in NYSE, NYSE MKT, which is formerly known as American stock exchange. Also, in the US, OTC refers to other financial instruments like derivatives which they trade via the dealer network.

Additionally, the OTC markets worldwide operate with some of the popular OTC networks. Thus, this includes the OTCQB venture market, OTCQX best market, and the pink open market. Also, Nasdaq is a dealer network, but they are not classified as OTC. So, Nasdaq is considered now as a stock exchange.

Currently, there are very few differences among the OTC networks and traditional exchanges. Also, this is because of the technology that allows for improvements in electronic trading and quotation. Thus, it has facilitated better information sharing and higher liquidity.

However, for a formal exchange, all the parties are exposed to offer each other counterparty. Also, in many cases of dealer networks, there are less stringent and less transparency given on the exchanges. 

Many investors prefer BRICS as a source for their foreign expansion policy because of low labor costs. 

Practice Questions on OTCEI

Q. Currently, how many companies are there in the Sensex in India?

A. 50 companies

B. 30 companies

C. 20 companies

D. 40 companies

Answer: B. 30 companies

Q. Which of the below countries has KOSPI as its stock exchange index?

A. Singapore

B. South Korea

C. United States of America

D. North Korea

Answer: B. South Korea

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