Over-The-Counter Exchange Of India - OTCEI

What Does Over-The-Counter Exchange Of India - OTCEI Mean? An electronic stock exchange based in India that is comprised of small- and medium-sized firms looking to gain access to the capital markets. Like electronic exchanges in the U.S. such as the Nasdaq, there is no central place of exchange and all trading is done through electronic networks. Investopedia explains Over-The-Counter Exchange Of India - OTCEI The first electronic OTC stock exchange in India was established in 1990 to provide investors and companies with an additional way to trade and issue securities. This was the first exchange in India to introduce market makers, which are firms that hold shares in companies and facilitate the trading of securities by buying and selling from other participants.

Features of OTCEI: 1. Ringless and Screen-based Trading: The OTCEI was the first stock exchange to introduce automated, screen-based trading in place of conventional trading ring found in other stock exchanges. The network of on-line computers provides all relevant information to the market participants on their computer screens. This allows them the luxury of executing their deals in the comfort of their own offices. 2. Sponsorship: All the companies seeking listing on OTCE have to approach one of the members of the OTCEI for acting as the sponsor to the issue. The sponsor makes a thorough appraisal of the project; as by entering into the sponsorship agreement, the sponsor is committed to making market in that scrip (giving a buy sell quote) for a minimum period of 18 months. sponsorship ensures quality of the companies and enhance liquidity for the scrip’s listed on OTCEI. 3. Transparency of Transactions: The investor can view the quotations on the computer screen at the dealer’s office before placing the order. The OTCEI system ensures that trades are done at the best prevailing quotation in the market. The confirmation slip/trading document generated by the computers gives the exact price at which the deals has been done and the brokerage charged. 4. Liquidity through Market Making: The sponsor-member is required to give two-way quotes(buy and sell) for the scrip for 18 months from commencement of trading. Besides the compulsory market maker, there is an additional market maker giving two way quotes for the scrip. The idea is to create an environment of competition among market makers to produce efficient pricing and narrow spreads between buy and sell quotations. 5. Listing of Small and Medium-sized Companies: Many small and medium-sized companies were not able to enter capital market due to the listing requirement of Securities Contracts (Regulation) Act, 1956 regarding the minimum issued equity of Rs.10 crores in case of the Mumbai stock Exchange and Rs.3 crores in case of

other stock exchanges. The OTCEI provides an opportunity to these companies to enter the capital market as companies with issued capital of Rs.30 lacks onwards can raise finance from the capital market through OTCEI. 6. Technology: OTCEI uses computers and telecommunications to bring members/dealers together electronically, enabling them to trade with one another over the computer rather than on a trading floor in a single location. 7. Nation-wide Listing: OTCEI network is spread all over India through members, dealers and representative office counters. The company and its securities get nation-wide exposure and investors all over India can start trading in that scrip. 8. Bought-out Deals: Through the concept of a bought-out deal, OTCEI allows companies to place its equity 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. Benefits of getting OTCEI Listing for Companies. The OTCEI offers facilities to the companies having a issued equity capital of more than Rs. 30 lakhs. The benefits of listing at the OTCEI are:
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Small and medium closely-held companies can go public. The OTCEI encourages entrepreneurship. Companies can get the money before the issue in cases of Bought-out-deals. It is more cost-effective to come with an issue of OTCEI. Small companies can get listing benefits. Easy issue marketing by using the nation-wide OTCEI dealer network. Nation-wide trading by listing at just one exchange.

Benefits of Trading on OTCEI for Investors :
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The OTCEI trading counters are easily accessible by any investors. The OTCEI provides greater confidence to investors because of complete transparency in deals. At the OTCEl, the transactions are fast and are completed quickly. The OTCEI ensures security, liquidity by offering two-way quotes. The OTCEI is an investor friendly exchange with Single Window Clearance for all investor requests

OTC Exchange of India has been co-promoted by the leading financial institutions of the country:
ICICI Bank Limited Administrator of Specified Undertaking of Unit Trust of India IDBI Bank Limited. SBI Capital Markets Limited IFCI Limited Life Insurance Corporation of India Canbank Financial Services Limited General Insurance Corporation of India The New India Assurance Company Limited The Oriental Insurance Company Limited United India Insurance Company Limited National Insurance Company Limited

The participants of OTCEI:1. 2. 3. 4. 5. 6. Members and dealers appointed by OTCEI, Companies whose securities are listed, Investors who trade in the OTCEI, Registrar who keeps custody of scrip certificates, Settlement Bank which clears the payment between counters, and SEBI and Government who supervise and regulate the working.

POLICIES AND PROCEDURES for Client Dealings

A. Refusal of orders for penny /illiquid stocks. The Stock Broker may from time to time, limits (quantity/ value) / refuse orders in one or more securities due to various reasons including market liquidity, value of security(ies), the order being for securities which are not in the permitted list of the stock broker/exchange/SEBI. Provided further that stock broker may require compulsory settlement /advance payment of expected settlement value /delivery of securities for settlement prior to acceptance / placement of order(s) as well. The client / sub-broker agrees that the losses, if any on account of such refusal or due to delay caused by the client or sub-broker. The Stock broker may require reconfirmation of orders , which are larger than that specified by the stock broker’s risk management , and is also aware that the stock broker has the discretion to reject the execution of such orders based on its risk perception.

B) Setting up clients exposure limits. The Stock Broker has a policy of collecting a minimum deposit of Rs.3 Lacs from all its active sub-brokers called as Base Deposit. Any amount over and above Rs.3.00 Lacs received from sub-brokers against trading exposure is counted as an Additional Base Deposit. Presently, OSL provides following maximum exposure limits to its sub-brokers.
Gross Exposure Limit: 8.5 times the total deposit (Base Deposit plus Additional Base Deposit) Sub-brokers in turn provide trading limits to their clients. However, the total limits of all the clients of a particular sub-broker cannot exceed the exposure limits set by the OSL for that sub-broker. The exposure Limit/deposit of a sub-broker may be enhanced in the following circumstances: A. Early pay-in of Securities which includes Securities already lying with OSL for that particular client.

B. Early pay-in of Funds including Credit balance in the accounts of concerned client. C) Applicable brokerage rate.

The stock broker is entitled to charge brokerage within the limits imposed by exchange which at present is as under Maximum brokerage chargeable in relation to trades effected in securities admitted for dealing in the capital market segment of the Exchange shall be 2.5% of the contract price exclusive of statutory levies.

D) Imposition of penalty/ delayed payment charges.
The client/ sub-broker agrees that any amount which are overdue from the client / sub-broker towards trading or on account of any other reason to the sub-broker will be charged with delayed payment charges at such rates as may be determined by the stock broker. The client / sub-broker agrees that the stock broker may impose fines / penalties for any orders / trades / deals / actions of the client / sub-broker which are contrary to this agreement / rules / regulations / bye laws of the exchange or any other law for the time being in force, at such rates and in such forms as it may deem fit. Further where the stock broker has to pay any fine or bear any punishment from any authority in connection with / as a consequence of / any relation to any of the order / trades / actions / deals of the client / sub-broker , the same shall be borne by the client / sub-broker.

The client / sub-broker agrees to pay to the stock broker brokerage / commission, fees, all taxes, duties, levies imposed by any authority including but not limited to the stock exchange (including any amount due on account of reassessment / backlogs etc.), transaction expenses, incidental expenses such as postage, courier etc. as they apply from time to time to the client’s / sub-broker’s account / transactions / services / that the client / or sub-broker avails from the stock broker.

E) The right to sell client securities or close clients positions without giving notice to the client, on account of non-payment of clients dues.
The Stock broker shall be entitled to liquidate / close out all or any of the client’s position with oral intimation to the sub-broker for non-payment of margin / other amount due from the client to the stock broker, an exchange, a clearing house, an agent, or sub-broker of the stock broker and / or other individual, partnership, corporation , company, organization, association, trust or other entity acting for or on behalf of the stock broker, or any other outstanding debts etc. Any and all losses, financial charges

and / or incidental expenses incurred by the stock broker on account of such liquidation / closing out shall (at the discretion of the stock broker) be reimbursed by the client and / or sub-broker / charged to and borne by the client / sub-broker / deductible by the stock-broker from the monies and / or collateral margin of the client or brokerage of the sub-broker available with the stock broker.

F) Shortages in obligations arising out of internal netting of trades.
1)Closing out in the case of failure to give delivery for Normal Market Close out will be at the highest price prevailing in the NSE from the day of trading till the auction day or 20% above the official closing price on the auction day, whichever is higher. 2)Closing out in the case of failure to give delivery for Trade to Trade Market Any shortages in TFT-S will be directly closed-out on the settlement at the highest price prevailing in the Exchange from the day of trading till the T+1 day or 20% above the official closing price on the T+1 day, whichever is higher, or as declared from time to time.

G) Temporarily suspending or closing a client’s account t the Client’s request.
1) The client / or sub-broker may request the stock broker to temporarily suspend his account / adhering to conditions imposed by the stock broker but not limited to settlement of account and / or other obligation. 2) The stock broker can withhold the payout of client and suspend his trading account due to his surveillance action or judicial or / and regulatory order / action requiring client’s suspension.

H) De-registering a Client.
The stock broker may in its absolute discretion, decide to deregister a client with immediate effect in any of the following circumstances a) SEBI or any other regulatory body has passed an order against such client, prohibiting or suspending such clients from participating in the securities markets.

b) Such client has been indicated by a regulatory body or any government enforcement agency in case of market manipulation or insider trading or any other case involving violation of any law, rule, regulation, guidelines or circular governing securities market. c) Such client is suspected of indulging in illegal or criminal activities including fraud or money laundering. d) Such client’s name appears in the UN list of prohibited entities or SEBI debarred list. e) Such client’s account has been lying dormant for a long time or the client is non-traceable. f) Such client has been declared insolvent or any legal proceedings to declare him / her as such have been intended. g) Such client has been irregular in fulfilling obligation towards margin or settlement dues. h) Such client’s name appears in site www.watchoutinvestors.com and www.cibil.com.

I/we have fully understood the policies and procedures and do hereby sign the same and agree not to call into question the validity, enforceability and applicability of any provision/clauses in this document under any circumstances what so ever. These Policies and Procedure may be amended / changed unilaterally by the broker, provided the change is informed to me / sub broker with through any one or more means or methods including by massaging on the sub broker’s computer screen, by displaying it on broker’s website (making available as a download from the website), by displaying on the notice board of sub broker’s office through which clients trade. I / we agree that such other service providers shall be my / our agent and delivery shall be complete when communication is given to such other service providers by the stock broker and I / we agree never to challenge the same on any grounds including delayed receipt / non receipt or any other reasons whatsoever. These Policies and Procedures shall always be read along with the agreement and any dispute / difference or claim between me / us and stock broker before any court of law / judicial / adjudicating authority including arbitrator / mediator etc.

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