BSE set to launch SME exchange soon

The Bombay Stock Exchange will soon launch a separate exchange for small and medium enterprises (SMEs).

The Bombay Stock Exchange will soon launch a separate exchange for small and medium enterprises (SMEs). The exchange has already submitted its application with the capital market regulator,Securities and Exchange Board of India.

Last week,we had made a presentation to the capital market regulator. We are completely geared up to provide an alternative platform to meet the fund-raising requirements of the SME segment,which will be made operational very soon, said Madhu Kannan,MD & CEO of BSE while addressing a function in Mumbai on Wednesday. He further added that the exchange will come out with detailed guidelines in another two to three weeks.

Apart from BSE,the National Stock Exchange too has sought the regulatory approval for launching a separate SME platform. The NSE has submitted its proposal to the market regulator and is ready with the necessary trading software,according to a senior exchange official.

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In November 2009,Sebi issued the basic guidelines for setting up a separate platform for SMEs in India,making companies with a paidup capital of not more than Rs 25 crore eligible for listing on such exchanges. However,the process has been delayed as the responsibility of market making,which was entrusted with the merchant bankers,became a contentious issue among the merchant banking community. Market making is critical to the success of SME platform as it helps maintain liquidity by providing both the bid and offer price for securities. Sebi norms required merchant bankers to bear the responsibility for market making for a period of three years.

Since it is the mid-sized merchant bankers which are dominant among the small and medium companies,lack of sufficient funds at their disposal made it unattractive for them to take up the responsibility.