What Is the Over-the-Counter Exchange of India (OTCEI)?

The over-the-counter exchange of India (OTCEI) is an electronic stock exchange based in India that consists of small- and medium-sized firms aiming 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 occurs through electronic networks.

Key Takeaways

  • The Over-the-Counter Exchange of India, or OTCEI, is an Indian electronic stock exchange comprised of small and mid-cap companies seeking to gain access to capital markets in other countries.
  • Over-the-counter markets around the world are stock markets that function outside of formal exchanges.
  • In the United States, OTC is also a reference to debt securities and other financial instruments that trade over a dealer network.

Understanding the 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.

Thanks to advances in technology that have yielded improvements in electronic trading platforms, the differences between traditional exchanges and OTC networks are not so substantial. The big advantage of formal exchanges is more transparency and the opportunity to see offers from every other counterparty.

OTCEI and OTC Trading in U.S. Markets

In the U.S. and worldwide over-the-counter, or OTC markets, exist outside of formal exchanges. In the U.S. these include the New York Stock Exchange (NYSE), Toronto Stock Exchange or the NYSE MKT, formerly known as the American Stock Exchange (AMEX). In the U.S. OTC also refers to debt securities and other financial instruments, such as derivatives, which trade via a dealer network.

The OTC Markets Group operates some of the most popular OTC networks, including the OTCQX Best Market, the OTCQB Venture Market, and the Pink Open Market. While Nasdaq operates as a dealer network, Nasdaq stocks are generally not classified as OTC. The Nasdaq is considered a stock exchange.

Today, fewer differences exist among traditional exchanges and OTC networks, due to advances in technology that allow for improvements in electronic quotation and trading. These have facilitated higher liquidity and better information sharing. However, on a formal exchange, each party is exposed to offers by every other counterparty. In dealer networks, this may not be the case, given less transparency and less stringent regulation on these exchange.

Over-the-Counter Exchange of India: OTCEI and BRIC

India is part of the BRIC economic bloc that consists of Brazil, Russia, India and China (BRIC). BRIC refers to the notion that by 2050 China and India will become the world's dominant suppliers of manufactured goods and services, while Brazil and Russia will become similarly dominant as suppliers of raw materials. (BRIC now includes a fifth nation, South Africa.) May investors and companies cite BRIC as a source of foreign expansion opportunity, due to lower labor costs.