Over-the-Counter Exchange of India (OTCEI): What Australia Can Learn

The Over-the-Counter Exchange of India (OTCEI) might seem distant from Australia’s daily investment news, but its innovative model for boosting small and medium enterprise (SME) capital access in the 1990s offers timely lessons for our own evolving markets. As Australia’s policymakers and investors look for smarter ways to support growth businesses—especially with 2025’s regulatory updates on the horizon—the OTCEI’s journey is worth a closer look.

Why Was the OTCEI Created?

Launched in 1992, the OTCEI was India’s first screen-based, nationwide stock exchange, designed to help SMEs raise capital outside the traditional, often exclusive, major exchanges. The idea: streamline public listing for smaller companies and democratise investment opportunities across the country.

• Low Listing Requirements: Unlike the Bombay Stock Exchange (BSE), OTCEI made it simpler for smaller, high-potential companies to go public.

• Electronic Trading: OTCEI pioneered a fully electronic, transparent trading system—decades before digital-first exchanges became mainstream globally.

• Market-Making System: A unique market-maker model ensured liquidity, giving investors confidence they could buy and sell shares without the fear of being ‘stuck’ in illiquid assets.

This was a radical departure from India’s traditional, paperwork-heavy exchanges, and a lifeline for businesses outside the big city financial hubs.

The OTCEI’s Rise and Fall—And Its Enduring Lessons

During its peak in the mid-1990s, OTCEI provided a launchpad for hundreds of SMEs. Yet by the early 2000s, trading volumes dwindled, and in 2015, the exchange officially shut down. What went wrong? And what can Australia learn as we encourage more innovative, high-growth companies to list on our own markets?

• Regulatory Hurdles: OTCEI’s promise was hampered by complex, evolving regulations and a lack of clarity in oversight. For Australia, this highlights the need for streamlined, transparent rules as we modernise the ASX and explore new SME-focused boards.

• Technology Leapfrogged: India’s main exchanges eventually caught up with—and surpassed—OTCEI’s technology, eroding its unique value. In Australia, ongoing investment in market infrastructure remains critical for competitiveness.

• Liquidity Challenges: Despite the market-maker model, many OTCEI stocks remained thinly traded. Australia’s experience with the ASX Emerging Companies Market shows the same: without strong investor engagement and robust disclosure, liquidity can suffer.

In 2025, the Australian Securities and Investments Commission (ASIC) is consulting on simplified capital raising rules for small companies—directly echoing the OTCEI’s original mission. The lesson: innovation needs continuous policy support and adaptability.

What Does OTCEI Mean for Australian Investors and Policymakers?

While the OTCEI is now history, its legacy remains relevant as Australia debates the future of SME finance and capital markets:

• Alternative Trading Platforms: The rise of fintech, crowdfunding, and secondary trading platforms in Australia shows that demand for diverse, flexible capital channels is only growing.

• Investor Protection vs. Access: OTCEI’s challenges underline the importance of balancing easy access for SMEs with strong investor protections—a key focus for ASIC’s 2025 reforms.

• Policy Innovation: As the government reviews Australia’s financial market infrastructure, OTCEI’s experiment reminds us that bold, targeted policy can drive real change, but must evolve with technology and market needs.

For retail investors, the message is clear: opportunities abound beyond the blue chips. But due diligence, transparency, and awareness of liquidity risks are essential when exploring smaller company shares—whether on the ASX, NSX, or new digital platforms.

Looking Ahead: Building Smarter, More Inclusive Markets

The Over-the-Counter Exchange of India was a bold attempt to democratise access to capital and investment. Its successes and setbacks offer a roadmap for Australia’s next wave of market reforms. As the government and regulators gear up for changes in 2025, lessons from OTCEI can help ensure our capital markets remain dynamic, fair, and open to all.