Some facts about OTCEI

Trading Documents on OTCEI:

The trading documents on OTCEI are Counter Receipts (CRs) – permanent and temporary CRs, sale confirmation slip, application acknowledge slip, and transfer deed.

Initially, counter receipts were issued instead of share certificates as share certificate was not a mercantile document. The share certificate was kept with the registrar-cum custodian and a counter receipt was issued against this as a tradable document to the allottee along with the allotment advice. The counter receipt contained names of the investor and the company, number of shares, name and address of the registrar, price, commission, date and time of the transaction, investor’s signature, name of his bank, and signature of the issuing counter. Four copies of CR were prepared and sent to the investor’s counter, OTCEI, registrar and investor. The counter receipt could be exchanged for share certificate at any of the counters of OTCEI. If the investor wanted to sell these shares on OTCEI, he had just to surrender the permanent counter receipt and transfer deed at the exchange and get a sale confirmation slip. Later, as the trading volumes dipped, counter receipts were replaced be share certificates from March 1999.


OTCEI was the first exchange in India to have on-line trading cum depository. It became quote driven and a transparent system of trading. It provides a liquid cash market for retail investors with a T + 3 rolling settlement system and no problem of bad or short deliveries. Despite the unique advantages of the system, OTCEI got off to a poor start. Trading volumes were thin, liquidity was poor, and most of the investors were not aware of its existence. This was the result of the absence of a nationwide network, lack of an on line communication network of its own, and the fact that in initial stages it restricted its business to Mumbai.

Steps to Improve Turnover on OTCEI:

During 1993-94, OTCEI entered a Memorandum of Understanding (MOU) with the NASDAQ for enhanced cooperation between the two exchanges in the area of market technology, regulations, and business development.

As part of its expansion program, OTCEI invited applications in January 1995 for dealership in 54 cities, in 19 States across the country to achieve nationwide coverage. As a result, OTCEI could expand its dealer network from just 5 cities in 1995-96 to 23 cities during 1996-97. It has 60 national members and 145 dealers.

In order to increase the popularity of OTCEI, SEBI relaxed norms for listing on OTCEI during March 1995. The minimum post issue capital to be offered to the public to enable listing was lowered from 40 to 25 per cent. SEBI also permitted finance and leasing companies to get listed on OTCEI. With the exposure of price rigging scams of finance companies, OTCEI modified its guidelines in April 1995, making the listing of finance companies more stringent. Companies covered under the FERA/ MRTP Act were permitted to be listed on OTCEI. Hence, medium sized companies belonging to big industrial groups could join the OTCEI.

In 1996-97, OTCEI introduced trading of PSU bonds and launched a new segment called the listed mutual fund segment.

Despite relaxing the norms for the listing of securities, the turnover at the exchange steadily declined from 1994-95. Hence, SEBI appointed two committees – Malegam and Dave Committees to review OTCEI’s working and suggest measures to improve its functioning. The recommendations of these committees suggested relaxing the strict norms with which OTCEI had begun operating. During 1997-98, OTCEI re-launched trading in the permitted segment by moving over a weekly settlement cycle in line with the recommendations of the Dave Committee. The re-launched permitted segment witnessed increased activity with a coverage of 15 cities.

OTCEI revamped its trading activity by switching from the system of Counter Receipts to share certificates and dematerialization, with effect from March 1, 1999. Under the CR system, it was diffuclt to match the buyer and seller receipts which resulted in delays. All CRs in circulation were converted to share certificates or dematerialized.

OSL: OTCEI incorporated, on November 25, 1999, a wholly owned subsidiary OTCEI Securities Limited (OSL) to provide multiple benefits and greater business opportunities to its members. OSL was granted the certificate of commencement of business on January 14, 2000. When the volumes on OTCEI were plummeting and to provide its members an access to the trading segment of NSE at a considerably low cost, OSL became a member of NSE. The members and dealers of OTCEI are eligible to register themselves as sub brokers of OSL, This has increased opportunity for the members and reduced the brokerage charges payable by investors.