In an effort to boost trading volumes, the Over The Counter Exchange of India (OTCEI) has approached various domestic institutions, asking them to empanel the brokers of the exchange.
This is the first instance when an exchange itself has taken up this task of empanelment of brokers with the institutions.
Senior exchange officials recently met institutional investors including the Unit Trust of India (UTI), Industrial Credit and Investment Corporation of India(ICICI), Life Insurance Corporation (LIC) and leading mutual funds among others.
In the second round, the OTCEI officials will also meet foreign institutional investors (FIIs) to convince them to empanel brokers with them. OTCEI managing director Joseph H Bosco said the exchange has received good response from the domestic institutions.
"We have approached these institutions and discussed the issue of empanelment of our brokers. We are aware that these institutional investors follow a strict policy for empanelment, which include high net worth criteria. Despite this , we have put forward our request," informed Bosco.
The domestic institutions are yet to take a view on this matter. This apart, the OTCEI is banking on the common members, which the two exchange have, for increasing the volumes.
"For achieving volumes, we are targeting the 240 common National Stock Exchange (NSE) and OTCEI brokers, who will get an additional platform to trade. We have already received a lot of commitment from large players. Once volumes start rising, a lot of smaller brokers will also be attracted towards OTCEI," Bosco said.
"We are offering a lot of incentives. Firstly, we will have a different settlement cycle from Friday to Thursday as against NSE's trading cycle from Wednesday to Tuesday. This will help the broker to take the maximum advantage of the price arbitrage as he can shift his position between three exchanges. It will also see a lot of growth of volumes on the OTCEI," he said.
The exchange has also taken an in-principle decision to phase out the counter receipts (CRs) by the end of the September.
According to Bosco, CRs were proving to be a major impediment as the banks did not treat this as an instrument and thus refused to give any credit.
While phasing out the CRs, the OTCEI will be in consultation with the company and its registrars will issue physical shares.
At no point will the CRs and the physical shares exit together.
Later, the exchange plans to undertake an exercise with the National Securities Depository (NSDL) to dematerialise all the physical shares. "This is what we are finally planing to arrive at," Bosco said.
Bosco said that the exchange does not anticipate a bad paper problem, which had bogged the NSE during the past two years.
