The Securities and Exchange Board of India (Sebi) today issued
norms-legal framework for setting up separate platform/stock exchange
for small and medium enterprises (SME). It has set minimum net worth
criteria of Rs 100 crore for entity wanting to set up an exchange for
SMEs.
Sebi has said that such entities should be corporatized since
inception and it should be demutualised within 1-2 years from the date
of trading. This means that the promoter of the exchange should dilute
51 per cent equity in specified period.
Other norms prescribed by the regulator are having nation wide
trading terminals, an online screen-based trading system and suitable
business continuity plan including a disaster recovery site.
These conditions make it virtually impossible for regional exchanges
to set up SME exchange independently. Regional exchanges that have
demutualised like Delhi stock exchange don’t have nationwide terminals
or reach. Financial Technology (FT) group has picked up five per cent
stake in the DSE, while BSE holds 5 per cent equity in Calcutta stock
exchange (CSE).
Both the exchanges in past have declared their intentions to convert
themselves in to an exchange for SMEs. DSE and CSE can set up such
platform with the license to use network of their partners only.
FT group company MCX has nationwide network, while their subsidiary
for currency futures also has such network. Sebi has said in the legal
framework released today that the entities should have online
surveillance system also.
FT group and existing national exchanges NSE and BSE have expressed
their willingness to set up platform for SMEs. Since they have ready
infrastructure and other capabilities as required by the regulator,
they may move faster then others.
The exchange for SMEs will be different from existing stock
exchanges in terms of companies raising capital and investors investing
money in such companies. Sebi has fixed the minimum trading lot of Rs 1
lakh and trading system may either be order driven or quote driven. The
settlement may either be on rolling, trade for trade or call auction
basis.
The clearing function of the exchange may be performed by a clearing house, said Sebi in a framework released today.
A separate exchange for SMEs was advocated since long and in the
last board meeting, Sebi has cleared the proposal to allow exchange for
SMEs. Sebi has asked exchange to get registered under the SCR Act and
even their members should get registered with Sebi. The exchange will
help small and medium companies raising capital, especially when such
companies don’t have required track record.
Minimum Rs 1 lakh of investment norm will ensure investors having
proper understanding about the risk in such investment will invest and
SMEs having post issue capital of Rs 25 crore will qualify for raising
capital through such specialized platforms.
