SEBI Sets Guidelines for Market Makers on SME Exchanges

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.

Indian Equity Market update for week ended January 23, 2009

• Benchmark Indian equity indices ended more than 5% lower in the week ended January 16, led by flight of foreign funds and weak global sentiments
• Foreign institutional investors sold equities worth Rs 2309 cr (US$ 46 bn at current exchange rates) during the week till January 22; meanwhile mutual funds were marginal net sellers of equities worth Rs 116 cr (US$ 3 bn) during the week
• The benchmark BSE Sensex ended 6.96% lower for the week, while the broader S&P CNX Nifty ended 5.3% down.
• Weak Quarter 4 (October-December) results from some companies also led to selling in those stocks.
• All BSE sector indices analysed ended down, with BSE FMCG and Power being the least affected, while BSE Realty and BSE Metal being the worst affected.
• FMCG Index was the least affected down 2.2% for the week, as the sector is seen as a defensive bet in terms of turmoil.
• The second least decliner among sectoral indices was the power index, as sentiment improved after the Central Electricity Regulatory Commission hiked return on equity for power projects to 15.5% from 14% earlier.
• These new norms are especially going to benefit state-owned power companies such as Power Grid Corp which ended up 14% and was top Nifty gainer.Among other gainers, oil and gas shares such as Reliance and ONGC fared better during the week after the government has approved a three-year drilling holiday for deepwater exploration blocks.
• Among laggards, real estate shares were the worst hit on weak results forecast amid uncertain outlook; leading stock in the sector DLF slid more than 17,5% for the week.
• Metal shares fell on weak global cues; Steel Secretary’s statement that consumption of the commodity fell 13.5% YoY in Quarter, reversing a 10-12% growth trend in the past four years hit sentiment for steel companies.