Guidelines for market makers on Small and Medium Enterprise (SME) exchange/separate platform of existing exchange having nation wide terminal
Summary
This SEBI circular establishes mandatory guidelines for market makers operating on Small and Medium Enterprise (SME) platforms of stock exchanges. It outlines the registration process, specific operational obligations such as quote provision and depth requirements, and risk containment measures. The document also details monitoring protocols, disciplinary actions for violations, and pricing constraints like spreads and price bands.
Text
These guidelines are applicable to all the registered Market makers for making market in all scrips listed and traded on SME exchange.
Any member of the Exchange would be eligible to act as Market Maker provided the criteria laid down by the exchange are met. The member brokers desirous of acting as Market Maker in this exchange shall apply to the concerned stock exchange for registration as Market Makers unless already registered as a Market Maker.
The Market Maker shall be required to provide a 2-way quote for 75% of the time in a day. The same shall be monitored by the stock exchange. Further, the Market Maker shall inform the exchange in advance for each and every black out period when the quotes are not being offered by the Market Maker.
The minimum depth of the quote shall be Rs.1,00,000/- . However, the investors with holdings of value less than Rs 1,00,000 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 along with a declaration to the effect to the selling broker.
Execution of the order at the quoted price and quantity must be guaranteed by the Market Maker, for the quotes given by him.
There would not be more than five Market Makers for a scrip. These would be selected on the basis of objective criteria to be evolved by the Exchange which would include capital adequacy, networth, infrastructure, minimum volume of business etc.
The Market Maker may compete with other Market Makers for better quotes to the investors;
Once registered as a Market Maker, he has to start providing quotes from the day of the listing / the day when designated as the Market Maker for the respective scrip and shall be subject to the guidelines laid down for market making by the exchange
Once registered as a Market Maker, he has to act in that capacity for a period as mutually decided between the Merchant Banker and the market maker.
Further, the Market Maker shall be allowed to deregister by giving one month notice to the exchange, subject to (g) above.
The exchange should disseminate the list of Market Makers for the respective scrip to the public.
The number of companies in whose shares a Market Maker would make market should be linked to his capital adequacy as decided by the exchange.
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Source: SecMarx — Guidelines for market makers on Small and Medium Enterprise (SME) exchange/separate platform of existing exchange having nation wide terminal. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.