Inter-Connected Stock Exchange (ISE)
The Inter-Connected Stock Exchange of India Ltd. (ISE) is a national-level stock exchange in India, operating under the ownership of the Ministry of Finance, Government of India. Established in 1998, the ISE provides a centralized platform for trading, clearing, settlement, risk management, and surveillance to its trading members.
Background and Structure
The ISE was promoted by 12 regional stock exchanges located in:
- Bangalore
- Bhubaneswar
- Chennai
- Kochi
- Coimbatore
- Guwahati
- Indore
- Jaipur
- Kanpur
- Mangalore
- Magadh
- Vadodara
Often referred to as a "stock exchange of stock exchanges," the ISE enables members of regional stock exchanges to trade on a national platform, thereby enhancing market access and participation.
Objectives of the ISE
- To interconnect regional exchanges to improve liquidity, especially due to the low trading volumes on individual regional stock exchanges.
- To consolidate small, fragmented, and illiquid markets into a unified, liquid national-level market.
- To reduce operational costs for regional exchanges that were incurring high expenses while supporting thinly traded markets.
Over-The-Counter Exchange of India (OTCEI)
The Over-The-Counter Exchange of India (OTCEI) is an electronic stock exchange designed specifically for small and mid-cap companies. It was established to help companies raise capital that would otherwise be unable to meet the stringent listing requirements of larger national exchanges.
Incorporated in 1992 as a non-profit limited company, the OTCEI was promoted by key Indian financial institutions including ICICI, LIC, GIC, SBI Capital Markets, among others, with a paid-up capital of ₹5 crores. The exchange operates entirely through a computerized network and is headquartered in Mumbai.
The OTCEI is modelled after the NASDAQ in the United States and is recognized by the Securities Contract (Regulation) Act, 1956, giving it the same legal standing as other stock exchanges in India.
Key Features of OTCEI
- Exclusive Listing: Stocks listed on OTCEI cannot be listed on any other exchange, and vice versa.
- Capital Requirements:
- Minimum issued equity capital: ₹30 lakhs
- Maximum issued equity capital for listing: ₹25 crores
- Members must maintain a base capital of ₹4 lakhs
- Ringless Trading: OTCEI has no fixed trading floor. Dealers can operate from any location nationwide.
- Computerized Operations: All transactions occur via a central OTC computer system, connected through telecommunications.
- Wide Range of Securities: Trades include equity shares, preference shares, bonds, debentures, and warrants.
- Transparency: Investors can view real-time prices and market-maker quotes on computer screens.
- Trading Sessions:
- General Session: 10:00 a.m. – 3:30 p.m.
- OTCEI III Trade Market: 4:30 p.m. – 7:30 p.m.
- Settlement Period: OTCEI follows a weekly settlement cycle from Friday to Thursday.
Objectives of OTCEI
- Facilitate Listing for Small and Medium Enterprises (SMEs).
- Reduce Issue Costs for companies by simplifying the listing and fundraising process.
- Enable Transparent and Efficient Transactions, protecting investors from unethical brokers.
- Accelerate Settlement for quicker delivery and payment.
- Enhance Liquidity with the help of market makers.
- Create a Nationwide Trading Platform accessible from any part of the country.
Participants in OTCEI
- Investors: Can buy or sell any listed security at OTCEI counters.
- Registrar: Maintains share custody and records of members.
- Settlement Bank: Facilitates fund transfers between OTCEI dealers.
- SEBI and Government: Exercise regulatory oversight.
- Settler: Manages documentation for record-keeping and verification.
- Clearing House: Oversees the delivery and receipt of traded securities.
- OTCEI Counter: The designated place where investors interact with OTCEI members/dealers.
Trading Mechanism on OTCEI
- Primary Market - Two methods are used for issuing securities:
- Public Issue Method: The issuing company invites applications from the public and directly allots shares.
- Sponsor Method (Bought-Out Deal): A sponsor buys the entire issue from the company and later sells it to the public at a suitable price.
- Secondary Market
- Purchase of Scrips: Investors express their intent to purchase a specific security at an OTCEI counter.
- Sale of Scrips: Investors present a counter receipt with necessary details (counter code, name, and signature of the representative) when selling securities.
This streamlined structure and national accessibility make the OTCEI an important platform for India’s small and medium enterprises, while the ISE bridges the gap between fragmented regional markets and national-level stock trading.
FAQ's
What is the Inter-Connected Stock Exchange (ISE)? When was the ISE established?
The ISE is a national-level stock exchange in India, promoted by 12 regional stock exchanges, designed to interlink regional markets and improve liquidity. The ISE began operations in 1998.
Who owns and regulates the ISE? What is the main purpose of the ISE?
The ISE operates under the Ministry of Finance, Government of India. Its Purpose to create a unified trading platform by connecting regional stock exchanges, thereby improving market liquidity and reducing operating costs for smaller exchanges.
What is the OTCEI? When was OTCEI incorporated?
OTCEI is an electronic stock exchange in India, created to support small and medium-sized enterprises (SMEs) in raising capital. OTCEI was incorporated in 1992 as a non-profit company.
Who regulates OTCEI?
OTCEI is recognized under the Securities Contracts (Regulation) Act, 1956, and is overseen by SEBI and the Government of India.
