QUESTION: Discuss in detail the role and composition of NSEI and OTCEI?
ANSWER: NATIONAL STOCK EXCHANGE OF INDIA:
COMPOSITION: National stock exchange was incorporated in November 1992 with an equity capital of 25 crores. It is a professionally managed national market for shares. PSU bonds, debentures and government securities with all necessary infrastructure and trading facilities.
NSE is an electronic screen based system where members have equal access and equal opportunity of trade irrespective of their location in different parts of country as they are connected through a satellite network.
ROLE: National stock exchange of India is one of the most superior stock markets in India. It is the third biggest stock exchange in the world. It was set up with the following objectives:
- Establishing a nationwide trading facility for all types of securities.
- Ensuring equals access to investors all over the country through an appropriate communication network.
- Providing a fair, efficient and transport securities using an electronic trading system and establishing a countrywide trading facility for all types of securities.
- Ensuring equivalent entrance to investors all over the country through a suitable communication network to establish nationwide trading competence for equities and debt instruments.
- Providing for a reasonable, competent and translucent securities market using an electronic trading system and ensure the same right of entry to investors all over the country through an appropriate statement network.
- Enabling shorter settlement cycles to ensure fairness, efficiency and transparency of securities trading.
- Meeting up with global benchmarks and standards of securities market to the international level.
- NSE was established in order to offer a nationwide trading facility for equities, debts and hybrids. Thus, it intends to facilitate equal access to investors across the country.
To meet the objectives, the NSE is playing following role:
- Providing completely computerized screen based trading system consisting of extensive debt market, capital market and derivatives market. When a trade is carried out, the trade verification slip is printed at the trading member’s workstation.
- Trading is done on the computer with the help of PC terminals in broker’s offices. NSE brokers connects themselves to the computerized quotation structure. Brokers are allowed to buy and sell electronically.
- Transparent dealings are ensured as trading members place an order with the NSE stating the circumstances in terms of price, time on size. On the placement of the order, an order verification slip is prepared.
- Meeting the present worldwide standards of securities markets. Members should deliver securities and cash on the 13th and 14th day of trading correspondingly. 15th day of trading is the payout day.
- Advantage of computerized trading system is that the investor is able to find the best price for his scrips. Thus, the trading member can do business proficiently.
OVER THE COUNTER EXCHANGE OF INDIA:
COMPOSITION: OTCEI was established in October 1990 with an objective to provide an alternate market for the securities of smaller companies. Government of India has conferred it the status of a recognized stock exchange. This exchange has been jointly promoted by UTI, ICICI, IDBI, SBI, IFCI, GIC and Canbank financial services ltd.
The features of OTCEI are:
- It is a ringless and electronic national stock exchange. It is a stock exchange without a specified trading floor.
- It carters to the needs of the small business which have so far not met the requirements for listing on the stock exchange.
- This exchange has nation-wide reach. Market is spread across the country through numerous countries of the operators of the exchange.
- Small and medium sized companies with a paid up capital between 30 lakhs and 25 crores can be enlisted.
- OTCEI deals in equity shares, preference shares, bonds, debentures, warrants.
- Trading is by way of negotiated bidding.
ROLE: The role of OCTEI is as follows:
- There is transparency in transactions. The binds for purchase and sale are accepted on the screen of the computer, so the clients can see it themselves. In other exchanges, the deals are done in a ring where clients cannot go.
- The liquidity is ensured and a transaction in normally completed in 7 days.
- A proper scrutiny is done of scrips by the sponsors so the securities traded will be good.
- A company needing immediate funds can pledge its equity with the sponsor and thereby reduce interest cost.
- A company at one gets nationwide listing.
- Small and growth oriented companies would be able to grow faster as they would raise required capital through OTCEI market at a low cost.
- The companies listed on OTCEI are subjected to low income tax.