Over the Counter Exchange of India (OTCEI)

The traditional trading mechanism (floor trading using open outcry system), which prevailed in the Indian stock exchanges, resulted in much functional inefficiency such as absence of liquidity, lack of transparency, undue delay in settlement of transactions, fraudulent practices, etc. With the objective of providing more efficient services to investors, the country’s first electronic stock exchange which facilitates ringless, scripless trading was set up in 1992 with the name Over the Counter Exchange of India (OTCEI). It was sponsored by the country’s premier financial institutions such as UTI, ICICI, IDBI, SBI Capital Markets, IFCI, GIC and its subsidiaries and Canbank Financial services.

The exchange was set up to aid enterprising promoters in raising finance for new projects in a cost effective manner and to provide investors with a transparent and efficient model of trading. The OTCEI had many novel features. It introduced screen based trading for the first time in the Indian stock market. Trading takes place through a network of computers of over the counter (OTC) dealers located at several places, linked to a central OTC computer using telecommunication links. All the activities of the OTC trading process are fully computerised.

Moreover, OTCEI is a national exchange having a country-wide reach. OTCEI has an exclusive listing of companies, that is, it does not ordinarily list and trade in companies listed in any other stock exchanges. For being listed in OTCEI the companies have to be sponsored by members of OTCEI. It was the first exchange in the country to introduce the practice of market making, that is, dealers in securities providing two-way quotes (bid prices and offer prices of securities).