The capital market regulator is expected to soon issue final guidelines for setting up a trading platform exclusively for small and medium firms.The market regulator has already floated the concept for setting up the exchange which will enable Small & Medium Enterprises to raise capital from the primary market. The exchange will help small enterprises that could not fulfil the trading requirements of the BSE and the NSE, raise capital.
Micro, Small and Medium Enterprises (MSME) Secretary Dinesh Rai had earlier said there could be more than one exchange for the SMEs.
The issue of SME Stock exchange which has been under discussion for almost two years, is critical. SMEs are not able to raise capital through the market, since they cannot meet the listing and trading requirements of the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).The Securities and Exchange Board of India (Sebi), the capital market regulator, took an in-principle decision exactly a year ago to set up a separate exchange for SMEs. exchanges.Sebi had advocated a separate exchange for SMEs and invited applications for setting one up. It had said the exchange should register under the Securities Contracts (Regulation) Act and its members should register with Sebi. The exchange will help small- and medium-sized companies to raise capital, especially when they do not have the required track record. The BSE, NSE and the new entrant MCX Stock Exchange (MCX-SX) have shown interest in setting up a SME exchange. There are over 2.91 crore units in MSME that accounts for 40 per cent of the industrial output of the country.
The design of the SME exchange may differ from exchange to exchange, but it may be less liquid than the mainline exchanges’ cash segment, fewer investors may invest in issues floated by SMEs, and the amount raised per issue may be much lower than other issues. It will not be loosely regulated, but the disclosure norms may be simpler. The key to success will lie in marketing. SMEs need to be nurtured properly. They have to be educated about the need to become transparent and investor-friendly.