Book Closure:
Dates between which a company keeps its register of members closed for updating prior to payment of corporate benefits.
Bought Out Deal:
In a bought-out deal, a promoter off loads the security, which is to be issued to the public to raise finance, to a Member of OTCEI. The Member takes up this equity at the price fixed after a thorough appraisal of the company. He then offloads the equity, at a convenient time, to the public through an "Offer for Sale".
Clearing Bank:
The clearing bank facilitates cash settlement among the trading members and dealers. Currently the clearing banks are HFDFC Bank, Global Trust Bank and Canara Bank.
Clearing Entity:
Clearing entity facilitates physical settlement among the Members and Dealers .
Dealer:
The term "Dealer" means an individual or a corporate body appointed as a dealer of OTCEI. The functions of the dealer are:
- Broking activities
- Underwriting
- To act as a market maker (Compulsory/ Additional)
- To participate as co-investor in bought- out deals
Gross Exposure Margin:
Gross Exposure Margin is computed on the aggregate of the cumulative net outstanding positions (purchases or sales) in each security of the broker.
Inventory Bandwidtth:
The present market making mechanism on the Exchange does not provide for a "cushion effect" for the market maker to avoid dumping of scrips on him during adverse market conditions. It is proposed that a ceiling limit on the net inventory (cumulative buy - cumulative sell ) positions, for a given scrip, be introduced so that when a market maker reaches that level, circuit breakers come into effect and the "buy" side of the market maker's quotation gets disabled. Hence by compulsion, a Market Maker will not be compelled to pick any more inventory through the Market Making mechanism. Again, during this period, if the net purchase position / quantity falls below a certain limit, the "buy" side of the quotation gets enabled / activated automatically. So, there would be some kind of an inventory band (net purchases), in percentage terms, within which a market makers inventory would be allowed to fluctuate.
Listed Securities:
The class of securities listed on OTCEI. The securities can be bought or sold at any of the member/ dealer office all over India. The category includes Listed equities, Listed Debentures & Listed Mutual Funds.
Mark to Market Margin:
Mark to market margin is computed on the basis of mark to market loss of a member/dealer. Mark to market loss is the notional loss which the member/dealer would incur in case the cumulative net outstanding position of the member/dealer in all securities at the end of the day in consideration were closed out at the closing price at the end of day.
Market Making:
The process of giving two way quotes (buy & sell) for a particular security. The market maker benefits through the spread (difference between the buy and sell quotes). In OTCEI the compulsory market maker (CMM) gives two-way quotes (Buy & Sell) for the scrip for the first 18 months on commencement of trading. Besides the CMM, there is an additional market maker (AMM) giving 2 way quotes for the scrip. Competition among market makers produces efficient pricing, reduces spreads between buy and sell quotations and provides capacity to absorb large increase in volumes. The market makers continually analyze companies and provide information about them to their investors thus generating investor interest.
Member:
The term "member" means a corporate body with a minimum net worth of1.0 crores, appointed as a member. A member can sponsor issues and also undertake secondary market activities like a Dealer.
Net Exposure Margin:
Net Exposure Margin is computed on the cumulative net outstanding purchases (excess of purchases over sales) of the broker.
Pari Passu:
A term used to describe new securities issued by the company that are entitled to the same rights as the securities already in existence.
Permitted securities:
The class of securities which are allowed to be traded on the Exchange, but are listed on other stock exchanges.
Registrar:
A registrar facilitates transfers and does related activities for the securities on the Exchange.
Sponsorship:
All companies seeking listing on OTCEI have to approach Members for acting as the Sponsor to the issue. The sponsor appraises the project. By entering into the sponsorship agreement, the sponsor is committed to making market in that scrip by giving a buy/sell quote for the initial period of 18 months. This benefits investors as this enhances liquidity for securities listed on OTCEI.
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CAclubindia
