NSE, BSE get nod to set up SME platforms

The Securities and Exchange Board of India (SEBI) has granted the Bombay Stock Exchange as well as the National Stock Exchange, an in-principle approval for setting up a separate segment for small and medium enterprises (SMEs).

The stock market regulator has approved preliminary applications from the exchanges nearly a year after they were submitted, around July 2010.

“We have been actively engaging with market participants on the proposed SME platform and we are making good progress to operationalise it,” said Ravi Narain, managing director and chief executive officer, NSE.

“This is part of our strategy to offer superior services and products to investors in India. It also ties up well with the governmental agenda of greater financial inclusion and allowing promising enterprises of the future to access retail capital,” said Madhu Kannan, managing director and chief executive officer at the BSE.

The exchanges submitted applications after SEBI came out with a set of norms on fundraising for SMEs in November 2009.

In its circular, merchant bankers were asked to bear responsibility for market-making for a minimum period of three years.

A market-maker provides liquidity to companies, providing the buy and sell quotations required to facilitate trade in their securities when there is not enough activity in the market.    

The requirement that all such companies have merchant banker act as market makers, either alone or in partnership with other entities, may act as a sticking point for the platform; various stakeholders are learnt to have communicated to the regulator.
SEBI is learnt to have held firm on the rules, however.

“If there are some merchant bankers who don’t want to play market-maker, there will be others who are willing to do so,” said an exchange official who declined to be identified on account of the sensitivity of the issue.

Others who applied for a foray in the SME segment include MCX-SX and the Interconnected Stock Exchange, an association of twelve regional stock exchanges.

An MCX-SX spokesperson did not respond to a query on the status of their application.

“We will be applying to SEBI for an inspection sometime next month. This is a step necessary before getting the in-principle approval,” said PJ Thomas, managing director of the Interconnected Stock Exchange.