Capital market regulator Securities & Exchange Board of India (SEBI) has issued guidelines for setting up of SME exchanges. The exchange is to be set up as a corporatised entity and is required to convert themselves into a demutualised entity within 1-2 years from the date of commencement of trading.
The exchange should have a balance sheet of at least Rs 100 crore and minimum trading lot would be of Rs 1 lakh. The minimum ticket size for transactions on the SME exchange would ensure that only high net worth individuals were eligible, so that uninformed investors do not lose money.
SEBI announced its intention of setting up multiple exchanges last month. In its statement last month, SEBI said: “In recognition of the need for making finance available to needy small and medium enterprises, the board decided to encourage promotion of dedicated exchanges and/or dedicated platforms of the exchanges for listing and trading of securities issued by SMEs. Multiple exchanges or platforms would provide the necessary competition in this space.”
The idea of setting up multiple exchanges is a change in stance on the part of SEBI from when M Damodaran was heading the regulator. Then SEBI had announced that only a single SME Exchange would be set up in contrast to the recommendation of multiple exchanges now.
Bombay Stock Exchange had earlier launched a separate trading platform `IndoNext’ for SMEs that did not work so well.
There are more than 50 SME alternate markets, stock exchanges, boards of trade, lower tier exchanges across the world. They include AltX of South Africa to Mercato Expandi in Italy.
For details of SME framework, click here.