The SME exchange of the Bombay Stock Exchange is actively working on evolving an “inventory bandwidth” model that will enable migration of market makers from unlimited liability model to one with a ceiling for maximum and ground for minimum floating stock.
The inventory bandwidth will facilitate a ceiling on the inventory, avoiding compulsory purchase by market makers in times of adverse market conditions. “Once introduced, market making will become a range-bound activity leaving no obligation on the part of the market makers to buy beyond a limit,” BSE SME Exchange Chief Executive Officer Lakshman Gugulothu told The Hindu.
Threadbare discussions were held with the Securities and Exchange Board of India (SEBI) in this direction and it was hoped that the bandwidth concept would be put in place in the next couple of months. The system would enable considerable reduction of costs in market making and help more SMEs to raise capital through exchanges.
The market regulator, he said, was considering simplification of norms facilitating professional firms to secure licences for providing merchant banking services to firms aspiring to get listed on SME exchange.
Mr. Lakshman was here on Saturday to participate in a workshop on BSE SME Exchange — new initiative for raising equity capital for MSMEs” organised by the Federation of Andhra Pradesh Chambers of Commerce and Industry.
The SME Exchange at present had 30 registered market makers and the number was likely to be at least 100, once the activity in the new bourse was streamlined.
Moves are under way to rope in NBFCs as nominated investors in the forthcoming IPOs on the SME exchange to overcome the shortage of merchant bankers.
On the status of the Exchange, he said one company was already listed on the exchange while three others were gearing up to announce their IPOs in the next couple of weeks.