What is Over the Counter Exchange of India (OTCEI)?
Over the Counter Exchange of India (OTCEI) is an organisation, which was incorporated in 1990 under the Companies Act 1956. The trading in OCTEI commenced in 1992 and is a fully computerised, single window, and transparent exchange. OTC Market or Over the Counter can be defined as a place where sellers seek buyers and buyers seek sellers, and then tries to arrange some terms and conditions for the sale and purchase, which is acceptable to both parties. OTCEI was established to provide access to the capital market to small and medium companies, so they can raise finance in a cost-effective manner and provide the investors with a convenient, efficient, and transparent avenue for capital market investment.
Common Features between NSEI and OTCEI
The common features between them are as follows:
1. Incorporate Entities: The National Stock Exchange of India and Over the Counter Exchange of India, both have been established as companies, which are promoted by the leading banks, financial institutions, insurance companies, and other financial intermediaries.
2. Transparent Market: As the transactions taking place are screen-based, both NSE and OTCEI provide the traders with a transparent market. Besides, the investors can check the exact price of the securities at which the transaction has taken place.
3. Nationwide Coverage: The NSEI and OTCEI, both have nationwide coverage. It means that there are no geographical and distance barriers in the National Stock Exchange of India and Over the Counter Exchange of India.
4. No Trading Floor: The NSEI and OTCEI both don’t have a trading floor. In other words, the trading in both exchanges takes place through a computer network.
5. Screen-Based Trading: The transactions under NSEI and OTCEI are conducted electronically through computers by using a satellite link.
Difference between NSEI and OTCEI
A market that serves as a link between the savers and borrowers, by transferring the capital or money from those who have a surplus amount of money to those who are in need of money or investment, is known as Financial Market. In general, the investors are known as the surplus units and business enterprises are known as the deficit units. Hence, a financial market acts as a link between surplus units and deficit units and brings the borrowers and lenders together. The four basic functions of a financial market are the facilitation of price discovery, mobilisation of savings and channelising them into the most productive use, provision of liquidity to financial assets, and reduction of cost of the transaction. Financial Markets are of two types; namely, Capital Market and Money Market.