SEBI formulates guidelines for market makers

Market makers in SME (small and medium enterprises) exchanges will have to follow the guidelines of the Securities and Exchange Board of India (SEBI).

A market maker is a bank or brokerage company that ensures proper execution on the exchange on behalf of a firm. They are expected to ask and bid price so that a seller of a stock does not end up with no one on the other side.

They would be required to provide two-way quote for 75 per cent 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 exchange will select the market maker depending on capital adequacy, networth, infrastructure, minimum volume of business, etc.

Sebi had laid down the criteria for SME listings to encourage them to come out with public issues. Firms having paid-up capital of up to Rs 25 crore can get listed on the SME platform.