Inventory Management for Market Makers of SME Exchange / Platform
Summary
This circular establishes inventory management guidelines for market makers on SME exchanges, specifically setting upper-side limits based on issue size. It mandates that market makers provide two-way quotes during the first three months and defines how inventory levels are calculated for threshold compliance. The directive requires stock exchanges to amend their regulations and report implementation status to SEBI.
Text
limits on the upper side for market makers during market making process taking into consideration the issue size in the following manner - Upto ₹20 Crore 25% / ₹20 Crore to ₹50 Crore 20% / ₹50 Crore to ₹80 Crore 15% / Above ₹80 Crore 12%
Re-entry threshold for buy quotes (including mandatory initial inventory of 5% of issue size) - Upto ₹20 Crore 24% / ₹20 Crore to ₹50 Crore 19% / ₹50 Crore to ₹80 Crore 14% / Above ₹80 Crore 11%
The exemption from threshold shall not be applicable for the first three months of market making and the market maker shall be required to provide two way quotes during this period irrespective of the level of holding.
Threshold for market making as prescribed will be inclusive of mandatory inventory of 5% of issue size at the time of allotment in the issue.
Any initial holdings over and above such 5% of issue size would not be counted towards the inventory levels prescribed.
Apart from the above mandatory inventory, only those shares which have been acquired on the platform of the exchange during market making process shall be counted towards the Market Maker's threshold.
The market maker shall give two way quotes till he reaches the upper limit threshold, thereafter he has the option to give only sell quotes.
Two way quotes shall be resumed the moment inventory reaches the prescribed re-entry threshold.
In view of the market maker obligation, there shall be no exemption/threshold on downside.
in the event the market maker exhausts his inventory through market making process on the platform of the exchange, the concerned stock exchange may intimate the same to SEBI after due verification.
make necessary amendments, if any to the relevant bye laws, rules and regulations for the implementation of the above decision.
disseminate the same on their website for easy access to the market makers and other market participants.
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Source: SecMarx — Inventory Management for Market Makers of SME Exchange / Platform. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.