Mumbai, July 7: The Over The Counter Exchange of India (OTCEI) has asked Sebi to reduce the Rs 100 crore networth requirement so that its depository can function under the Sebi depositories regulation. Currently the OTCEI trading and settlement system has an on-line depository which functions outside the ambit of the Sebi regulations. However, the exchange wants to convert the same into a full fledged regular depository. A request for the conversion is already pending with Sebi. Along with the request for a networth requirement reduction, it has also asked for a reduction in the depository participant networth requirement from Rs 50 lakh to Rs 5 lakh.

The waivers are being sought on the grounds that the depository will be catering only to the mid-cap and small cap companies listed on the OTC.If Sebi grants permission, the OTC depository will be the second depository after the National Securities Depository Ltd. The regulator is expected to take up the matter at a forthcoming board meeting.

Explaining the rationale for wanting to switch into a full fledged depository, M Pushpangadan, managing director of OTC, said that it will make the exchange offer a truly paperless environment. In the current set-up, even though the exchange has a online depository, the share certificates of the listed companies are held with the registrar while the investor is issued a counter receipt in lieu of these certificates.

So there is no electronic holding of the shares as in the regular depository. As a result, an investor does not have online transfer facilities with a counter receipt since he has to submit the CR with a fresh transfer form to the registrar both while selling and buying a security.

Presently the investor has to bear a lot of expenses like stamp duty and also expenses involved for fresh transfer deeds everytime an investor wants to transfer it in his name. These costs can be saved if the depository becomes a regular one.

The exchange proposes to allow any present OTC dealer to join as a DP provided it fulfills the Rs 5 lakh criterion. The exchange proposes that the trading in the electronic segment will be done on the hybrid trading software with a few changes. The exchange's depository will not cater to the permitted segment. For the permitted segment, OTC is trying to join up with the NSDL.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.