According to the committee, the market maker would be eligible to avail of lending and borrowing facilities under the stock lending scheme 1997. The market may also draw shares from promoters in a fair and transparent manner, the committee observed.

The committee urged the investment institutions to encourage their broking subsidiaries to take up market making in order to aid and strengthen the activity and asked the exchanges to pursue with their clearing banks to open special cells for lending to the market makers with adequate safeguards.

It has also strongly recommended that the RBI should encourage banks to participate in lending to market makers. The committee urged all the stock exchanges that they should adhere to the recommendations regarding selection of shares, capital adequacy andprice bands and recommended that they may mould the scheme to make it more attractive to the market makers.

The committee has recommended that market making be allowed in specific shares and excluded shares which are included in the Sensex of the Bombay Stock Exchange (BSE) and the S&P Cnx Nifty of the NSE.

The shares include those where the average number of trades is more than 50, where the value of trades on a daily basis is more than Rs 10,00,000, shares where the company is not in operation and the networth erosion is beyond 50 per cent and noted that the market making activity would be voluntary in nature.

The committee met today and submitted a final report containing the recommendations to the regulatory body, a Sebi release said. The committee stated that the market maker shall provide two way quotes in the shares he has committed to undertake market making, within five days of registration, at regular intervals of thirty minutes with a minimum depth of Rs 5,000 or one market lot whichever ishigher.

The obligation of the market maker to give two way quotes would end at one per cent less than the price band in that scrip, a Sebi statement here said.