After allowing exchanges to set up separate trading platform for small and medium size companies, the Securities and Exchange Board of India (Sebi) has issued guidelines for SME (small and medium enterprises) exchanges with respect to market making activity. Sebi has now made market making process mandatory for SME scripts and has laid down terms for members of the exchange who will be willing to engage in market making activity.
The market makers would bring in more liquidity and continuity in buy/sell activity on the exchange. Market makers would be required to provide 2-way quote for 75% of the time in a day. The minimum depth of the quote shall be Rs 1 lakh. However, investors with holdings of value less than Rs 1 lakh shall be allowed to offer their holding to the market maker in that scrip, provided that he sells his entire holding in that scrip in one lot to the selling broker.
The new Sebi guidelines also limit the number of market makers for a particular script; it has been set to five market makers. Sebi has also set several qualifying criteiras for becoming market maker.
The market makers would bring in more liquidity and continuity in buy/sell activity on the exchange. Market makers would be required to provide 2-way quote for 75% of the time in a day. The minimum depth of the quote shall be Rs 1 lakh. However, investors with holdings of value less than Rs 1 lakh shall be allowed to offer their holding to the market maker in that scrip, provided that he sells his entire holding in that scrip in one lot to the selling broker.
The new Sebi guidelines also limit the number of market makers for a particular script; it has been set to five market makers. Sebi has also set several qualifying criteiras for becoming market maker.
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