Over-The-Counter Exchange of India (OTCEI)

Key takeaways

• OTCEI is an electronic stock exchange in Mumbai focused on small- and medium-sized companies.
• It was created to help companies that cannot meet national exchange listing requirements raise capital.
• Trading is fully electronic with no single physical trading floor.
• Listings are restricted by capitalization limits and other rules designed for growth-stage firms.
• Key participants include brokers/market makers, custodians, registrars, and transfer agents.

What is OTCEI?

The Over-The-Counter Exchange of India (OTCEI) is an electronic stock exchange established to provide an accessible capital-raising venue for small- and mid-cap Indian companies. Recognized under India’s Securities Contract Regulation Act, OTCEI operates over a computer network rather than from a physical trading floor. It enables companies that cannot meet the stricter requirements of national exchanges to list, trade, and build a public market until they are ready to migrate to larger exchanges.

Purpose and background

Created to address the fundraising challenges faced by smaller firms, OTCEI offers a less onerous listing environment and rules tailored to growth-stage companies. Advances in electronic trading have reduced functional differences between OTC networks and traditional exchanges, enhancing access for small and medium enterprises (SMEs).

Core features

• Electronic trading only — no centralized trading floor.
• Exclusive listings — securities listed on OTCEI are not listed on other exchanges, and vice versa.
• Capitalization rules designed for SMEs:
• Minimum issued equity capital: 30 lakh rupees (≈ $40,000).
• Maximum allowed issued equity capital: 25 crore rupees (≈ $3.3 million); larger firms are ineligible.
• Member requirement: brokers/participants must maintain base capital of 4 lakh rupees (≈ $5,277).
• Intended as a stepping stone — companies are expected to migrate to national exchanges once they meet higher listing standards.

Listing requirements

To list on OTCEI, a company must meet several criteria geared toward investor protection and market stability:
* Obtain sponsorship from OTCEI members.
* Appoint at least two market makers.
* Promoters must retain at least 20% of issued equity capital for a minimum of three years.
* A newly listed company cannot be delisted for at least three years.

Market participants and transactions

OTCEI trading and settlement involve a set of defined roles:
* Brokers/Dealers — execute trades on behalf of buyers and sellers.
* Market makers — ensure share availability and help maintain orderly pricing by providing bid/ask liquidity.
* Custodians/Settlers — handle administrative and settlement tasks, document validation, and daily clearing.
* Registrars and transfer agents — manage share allotment and ownership transfers.

Conclusion

OTCEI fills an important niche in India’s capital markets by providing a regulated, electronic marketplace for small- and medium-sized companies that lack the size or resources to list on national exchanges. Its rules balance accessibility with safeguards—encouraging growth-stage firms to access capital while maintaining minimum standards for members and listed companies.