Until its IPO in September 2026, shares of the National Stock Exchange (NSE) could only change hands outside a stock exchange. That is how OTC markets work: two parties trade directly, with no exchange in the middle. Off-exchange, you give up the exchange's settlement system, its grievance process and an easy exit.
What Is the Over the Counter Market?
The simplest over the counter market definition: securities change hands directly between two parties, or through a dealer, instead of on a stock exchange.
On an exchange, orders from many investors meet in one order book, and the matched price is public. Knowing how the stock market works makes the contrast clear. In an OTC deal, a dealer quotes a price or the two sides negotiate one, privately.
Note: "OTC Markets" is also a US company running the OTCQX, OTCQB, OTCID and Pink Limited markets for about 12,000 securities (as of 2026); it is not an Indian market.
How OTC Markets Work: A Trade With No Clearing Corporation
On an exchange, a clearing corporation settles trades between buyers and sellers. NSDL classifies any trade settled without one as an off-market trade. A typical unlisted share deal works like this:
1. Buyer and seller, or a dealer between them, agree a price and quantity.
2. Payment is settled between them, outside the depository system.
3. The seller asks their depository participant (DP), the firm that runs their demat, to move the shares to the buyer's demat account. The buyer's receipt instruction must match.
4. NSDL or CDSL moves the shares on the execution date.
Step 2 is where the risk sits. If you pay and the shares never arrive, no clearing corporation stands behind the trade. That is counterparty risk.
The Over the Counter Market in India: Then and Now
OTCEI: India's OTC exchange, 1990 to 2015
The OTC Exchange of India (OTCEI) was founded in 1990 as India's first exchange for small companies. SEBI passed its exit order on March 31, 2015, so an offer to buy shares "on OTCEI" today is a red flag.
Unlisted shares and SEBI's warnings
The closest thing to an over the counter stock market is private trading in unlisted shares. SEBI holds that only recognised stock exchanges may provide a platform for trading securities. On June 17, 2026, it warned investors against buying unlisted public company shares through unauthorised websites, as it had in 2016 and 2024. These cautions sit within wider SEBI regulations on investor protection.
OTC derivatives: a bank-dealt market under RBI
A derivative is a contract whose value comes from something else, such as a currency. Many are agreed privately with a bank, like a forward contract in which an exporter fixes a future exchange rate. RBI requires the dealers in this market to report OTC trades to the Clearing Corporation of India (CCIL), which keeps a central record.
OTC Market vs Stock Exchange
Point | Stock exchange | OTC deal |
How the price is set | Orders matched in a public order book | Quoted or negotiated privately |
How it settles | Clearing corporation, next working day (T+1) | Off-market transfer, demat to demat |
Grievance route | Exchange redressal and online dispute resolution | Not available on unauthorised platforms |
Ease of exit | Sell in market hours if buyers exist | Find your own buyer, possibly after a lock-in |
The last row is really about stock market liquidity.
Going Deeper: What a Pre-IPO Lock-In Does to Your Money
SEBI's Issue of Capital and Disclosure Requirements (ICDR) Regulations lock in most pre-IPO shares held by non-promoters (investors other than the controlling owners). The lock-in lasts six months from IPO allotment, and it covers shares bought unlisted.
Just before NSE's unlisted shares entered lock-in on September 8, 2026, they traded around ₹2,040, according to unlisted-share trackers cited by Outlook Money. That is an indicative price, not an official quote. The IPO, an offer for sale by existing shareholders, was priced at ₹1,785.
For a buyer of 10 shares at ₹2,040:
• Amount paid: ₹20,400
• Value at issue price: ₹17,850
• Gap: ₹2,550, about 12.5%, with no option to sell for six months
This IPO lock-in period is set by regulation, so it applies whatever the market does. The example explains a mechanism; it is not a view on NSE shares.
Before You Deal Off-Exchange: A Short Checklist
Before any off-exchange purchase, check:
• Is the platform a recognised exchange on SEBI's list?
• Who is the counterparty, and what if they do not deliver?
• How will the shares reach you?
• When, and to whom, could you sell?
• Would a six-month lock-in apply on listing?
Never share personal details with a platform SEBI does not recognise. Avoid this route for money you may need soon or cannot afford to lose.
