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Over The Counter Exchange of India (OTC)

February 19, 08 by FinanceTurf

The OTCEI was established to address the specific needs of small business enterprises.

Small companies find difficulty in meeting the stringent requirements for listing shares at stock exchanges.

Thus, shares issued by small companies become untradeable n do not carry any liquidity.

As a result, when these companies issue shares there are very few buyers for them.

Thus the OTC has been set up as a second tier exchange for small companies.

“An electronic stock exchange based in India that is comprised of small- and medium-sized firms looking 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 is done through electronic networks.”

Basic features of Over The Counter Exchange of India are:-

a) Compulsory market maker to provide liquidity – mandatory sponsorship from banks/financial institutions for appraising the securities.

b) Settlement – payment and delivery within one week of transaction.



Secondary Market (Stock Exchange)

February 15, 08 by FinanceTurf

The secondary market is the market for the sale and purchase of previously issued securities. In the secondary market, securities are sold by and transferred from one investor or speculator to another.

It is therefore important that the secondary market be highly liquid (Originally, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly. This is how stock exchanges originated).

It derives its name from the fact that it is not the place of origin of the security, but the place where subsequent transactions of sale and purchase occur.

Securities in the market are not issued by the company directly to investors. Securities issued earlier are sold by an existing investor to another.

The company is not involved in the transaction at all. Any investor holding a security may choose to sell it. Likewise, any intending investor may wish to buy the security which had previously been issued by the company.

Kuwait Stock Exchange
Kuwait Stock Exchange

However, the intending buyer cannot by the security from the company because it had already sold it out at the time of the public issue. The intending buyer and seller need not know each other.

Brokers in the stock exchange are needed to serve as intermediaries between them.Secondary market does not directly contribute to capital formation.
The company does not receive or pay any money but performs an important function.

They impart liquidity to investment and enhance the marketability of securities.

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