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The BSE and the NSE have been given in-principle approval by SEBI for setting up SME exchanges and platforms.
These bourses and the MCX-SX had applied for permission from the regulator for a separate segment for the Small and Medium Enterprises (SMEs) in July 2010.
While the BSE and the NSE have received their approvals, MCX-SX would have to wait, according to officials.
MCX-SX had applied for approval for a stock exchange in 2010 and was denied permission.
A statement from the BSE said that it had received “an ‘in-principle' approval from the capital market regulator SEBI for launching the SME Exchange”.
An NSE spokesperson confirmed that the exchange had received approval for an SME platform.
“We look forward to the success of all stakeholders of the soon-to-be launched SME exchange and will continue to work closely with all of them to ensure a smooth and successful roll-out of the SME exchange,” said Mr Madhu Kannan, Managing Director and CEO of the Bombay Stock Exchange.
“We have been actively engaging with market participants on the proposed SME platform and we are making good progress to operationalise it,” said Mr Ravi Narain, Managing Director and CEO, NSE.
While the bourses are celebrating their approvals, several market players are concerned about the liquidity in the market.
“Having two separate platforms may not be a good idea as it might render the stocks illiquid. Otherwise it could lead to drying up volumes in the market,” said Mr Gurunath Mudlapur of Atherstone Capital Market.
Usable Models
Analysts also point out that large investor backing is of utmost importance. “The exchanges must create useable models and have similar structures in place, only then will the exchanges make sense and be a sustainable model,” said Mr Mudlapur.
Volumes and depth will also be another area of concern. “In a good market, the exchanges will be able to sustain themselves. But in a bad market, lack of volumes could hurt the markets,” said an exchange official.
With more than 5,000 listed on the BSE, officials say that the exchange stands to have the competitive advantage in the matter of SMEs. The BSE has various categories of stocks that gives it an advantage over the other exchanges.
Sources said all the small-cap stocks on the bourse may be pushed into its SME exchange.
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