The term Merchant Banking has its origin in the trading methods of countries in the late eighteenth and early nineteenth century when trade-taking place was financed by bill of exchange drawn by merchanting houses

Filing of offer document with Exchange and others

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18MB0408T - Unit II

Issue Pricing and Allocation
Listing and Market Making

Filing of offer document with Exchange and others

With a view to quicken the process of listing, the SEBI has delegated the powers to Exchange with respect to approving the Draft Red Hearing Prospectus.

Issue Pricing and Allocation

Like a main board listing, Initial Public Offering in SME Exchange can be made either through the fixed price method, book building method or a combination of both. For details, please refer "hyperlink"

Listing and Market Making

In comparison to the main board listing, SEBI has made it mandatory to have market maker for all the scrips listed on SME Platform.

The obligations for market makers are as follows:

	The merchant bankers to the issue will undertake market making through a stock broker who is registered as market maker with the SME Platform.
	The merchant bankers shall be responsible for market making for a minimum period of 3 years.
	The market makers are required to provide two way quotes for 75% of the time in a day. The same shall be monitored by the exchange.
	There will not be more than 5 market makers for scrip.
	Market makers will compete with other market makers for better price discovery.
	The exchange shall prescribe the minimum spread between the bid and ask price.
	During the compulsory market making period, the promoter holding shall not be eligible for the offering to market makers.
	Market Maker shall be allowed to deregister by giving one month notice to the exchange.
	Trading system may be either order driven or quote driven.

The application and trading lot size is being kept at Rs. 1, 00,000/- so as to curtail the entry of retail investors. It has also been stated that the minimum depth shall be of Rs. 1, 00,000/- and at any point of time it cannot go below that amount. The investors holding with value less than Rs. 1, 00,000/- shall be allowed to offer their holding to the market maker in one lot. However, in functionality the market lot will be subject to revival after a stipulated time.

Further, in accordance with the new regulation, the sub regulations (1), (2), and (3) of regulation 6 (filing of offer document) regulations 7 (in principal approval), regulation 8 (documents to be submitted before opening the issue), regulation 9 (draft offer document to be made public), regulation 10 (fast track issue), regulation 25,26, & 27 (eligibility requirements for IPO & FPO) and sub regulation (1) of regulation 49( minimum application value) of these issues shall not apply to an issue of specified securities made under this Chapter. That means, all other regulations will apply as such with such modifications as necessary.

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