NSE, BSE OTCEI & overseas stock exchanges
NSE, BSE OTCEI & overseas stock exchanges: The Bombay Stock Exchange (BSE) and the National Stock Exchange are the two stock exchanges where the majority of trade in the Indian stock market occurs (NSE). Since 1875, there has been an outbreak of the BSE. On the other hand, the NSE was established in 1992 and began trading in 1994. However, the trading procedures, trading hours, settlement procedures, etc. are the same for both exchanges. The competitor NSE only had roughly 1,200 listed companies, compared to the BSE’s about 4,700. Only roughly 500 of the BSE’s listed companies account for more than 90% of its market capitalization; the remainder is made up of extremely illiquid shares.
Nearly all of India’s notable companies are listed on both exchanges. With over 70% of the market share in spot trading as of 2009 and a nearly monopolistic 98% market share in derivatives trading, respectively, the NSE has a strong position in both markets. The order flow that drives cost reduction, market efficiency, and innovation is a source of competition for both exchanges. The existence of arbitrageurs maintains a fairly narrow range between the prices on the two stock exchanges.
OTCEI
An electronic stock exchange in India is referred to as the Over the Counter Exchange of India, or OTCEI. Additionally, it includes small and medium-sized businesses that want to access capital markets. Therefore, this is comparable to Nasdaq-style electronic exchanges in the USA. Additionally, there is no trade hub. In comparison, all trade is done on electronic networks.
A fantastic invention in the Indian stock market is the OTCEI idea. Both the Indian Companies Act and the Securities Contract (Regulations) Act of 1965 recognizes it as a stock exchange. OTCEI is a computer-based screen system that displays quotes from the scrips of businesses throughout the country’s many industries. There is no restriction on listing based on geography, and it has a national network. Dealers and investors can make choices more swiftly than they do on traditional stock exchanges. The tiny and marginal investors, who are still mostly ignored, are experiencing a massive surge.
Incorporated in October 1990, OTCEI. A group of prestigious financial institutions supported this firm, including UTI, ICICI, IDBI, SBI Capital Markets Ltd., IFCI, QIC and its subsidiaries, and Canbank Financial Services Ltd. According to Section 4 of the Securities Contract Regulations Act, 1965, the OTC Exchange is recognized by the Government of India as a “recognized stock exchange.”
A firm listed on the OTCEI cannot be listed or traded on any other stock exchange in India, but it will have the same listing status as other companies listed on any other stock exchange in the nation. Bombay is where the corporate office is located. It began operating in 1992.
42 locations throughout India have been connected to OTCEI via computers. INET, the first public switched data network in the nation, Telex, the first national information dissemination network, and RABMN, the remote area business message network, are all used by OTCEI to carry out its operations.
The scrip prices, which are produced by the OTCEI’s main computer in Bombay, can be obtained at any counter in any of the four hundred cities in India. Any individual or Indian citizen is eligible to apply for dealership or membership in the OTC as long as they meet the requirements.
A written test administered on a computer would also be required of the applicants. Professionals and those with prior expertise and a strong network will be given preference. People who have access to suitable networks and infrastructure, such as telephones, computers, telex machines, and fax machines, as well as office space, will also be given significant consideration.
NSE, BSE OTCEI & overseas stock exchanges
Features of OTCEI:
Following are the features of OTCEI:
- Ringless Trading:
For greater accessibility to the investor, the OTC Exchange has eliminated the trading ring. Trading will take place through a network of computers of OTC dealers located at several places within the same city and even across cities. The exchange allows dealers to quote, query, and transact through a central OTC computer using telecommunication links.
- National Reach:
Unlike other stock exchanges, the OTC Exchange has a nationwide reach. This enables widely dispersed trading across cities, resulting in greater liquidity. Companies thus have the unique benefit of nationwide listing and trading of their scrips by listing at just one exchange, the OTC exchange.
- Computerized:
All the activities of the OTC trading process are computerized. This facilitates a more transparent, quick, and disciplined market. The trading mechanism brings out these features of the system.
- Exclusive List of Companies:
The OTC Exchange will not list and trade in companies listed on any other exchange. It will list an entirely new set of companies, sponsored by members of the OTC Exchange.
- Closeness:
Initially, counters were opened in Bombay and were followed by counters at other centers. OTCEI will give public notice as to the availability of counters where trading takes place. Facility for trading will be available after the offer at the counters of the sponsor and the additional Market Maker addresses will be given in the new issue application attached to the offer for sale document (OSD) and with all the dealers of OTCEI.
- Authorized Dealers:
All members and dealers are authorized and approved by the OTCEI
- Liquidity through Market Making:
The sponsor-member requires day quotes (buy and sell) for the 12 months from the date of commencement of trading. Besides compulsory market makers, there are additional market makers and voluntary market makers who give two-way quotes for the scrip.
- Efficient Market Pricing:
Competition among market makers produces efficient pricing. This reduces spreads between buying and selling quotations. It also increases the capacity to absorb larger volumes, to the benefit of investors. The market makers continually analyze companies and provide information about them to their investors, thus helping investors to make an informed investment decision.
- Transfer of Securities:
Investors will be required to submit transfer deeds to any of the OTCEI counters for transferring the shares in their names. Shares will be automatically transferred in the name of the investors if the consolidated holding of the shares does not exceed 0.5% of the issued capital of the company.
- Investor Registration:
For buying and selling shares on the OTCEI an investor needs an “INVESTOTC Card”. Application for “INVESTOTC Card” can be made at any of the counters of OTCEI and also at the time of applying for new issues on the OTCEI. The share application form includes the necessary details to be filled in for obtaining INVESTOTC Card.
- Transparency of Transactions:
At the OTC Exchange, the investor can see the available quotations on the computer screen at the dealer’s office before placing the order. The confirmation slip/trading document generated through the computer gives the exact price of the transaction and the brokerage charge. So the investor’s interest is safeguarded. This system also ensures that transactions are done at the best prevailing quotation in the market.
- Faster Delivery and Payment:
On the OTC Exchange, the transaction is settled within 7 days. Further, the investor gets the delivery of the scrip or the payment for the scrip sold within 7 days.
- Sponsorship:
The companies that seek listing on the OTC Exchange have to approach one of the members appointed by the OTC for acting as a sponsor to the issue. The sponsor makes a thorough appraisal of the project, resulting in investors getting a choice of quality companies. Through the sponsorship agreement, the sponsor is committed to making a market in that scrip by giving a buy/sell quote for a minimum period of 1 year from the date of listing. Investors are benefited from this as it enhances the liquidity of the scrips listed on the OTC Exchange.
- Listing of Small and Medium Sized Companies:
In the past, many small and medium-sized companies were not able to enter the capital market, due to the listing requirement of the Securities Contract (Regulation) Act, 1956. The Act specified a minimum issued equity capital of Rs. 3 crores and a maximum of 25 crores for issuing.
The OTC Exchange provides an ideal opportunity for these companies to enter the Capital market. In fact, any company with an issued capital of more than Rs. 30 lakhs and less than Rs. 25 crores can raise finance from the capital market through the OTC Exchange.
- Bought-Out Deals:
Through the concept of bought-out deals, OTCEI allows companies to place their equity meant to be offered to the public with the sponsor-member at a mutually agreed price. This ensures swifter availability of funds to companies for timely completion of projects and a listed status at a later date.
Participants of OTCEI:
- Companies that list their shares on OTCEI.
- Members, and dealers who operate OTCEI counters.
- Registrars who transfer and keep share certificates.
- Investors.
- Settlement bank
- SEBI and government