SECURITIES AND EXCHANGE BOARD OF INDIA
SMDRP/POLICY/CIR-04/2000
January 20, 2000
To,
The Executive Directors/Presidents/Managing Directors
of all the Stock Exchanges
Sir,
Guidelines for market makers
With a view to study the concept of “Market Making” and to draft operational procedures for market making, eligibility criteria for Market Makers, risk containment measures, etc, SEBI constituted a Committee on March 24, 1998 under the chairmanship of Shri G P Gupta, then Chairman, UTI and current Chairman and Managing Director of IDBI. The Committee submitted its report to SEBI on August 31, 1999 vide letter No. SMDRP/Policy-MM/1 9336/99. A copy of the report was sent to you on October 07, 1999. The guidelines for the market makers based on the recommendations of the Committee are enclosed.
The market maker would operate under the regulatory framework as envisaged and laid out herewith in these guidelines .The Exchanges have been accorded flexibility to make modifications to their schemes to make it more attractive to the Market Makers to take up commitments under the schemes, however, the terms of selection of scrips, the capital adequacy norms and the risk containment measures such as the price bands and margins would not be altered from those stipulated in these guidelines.
The exchanges shall explore the possibility of their clearing banks opening special cells in the bank for providing funds to the market makers and creating a corresponding lien on the shares held/traded by the market makers.
The list of the scrips eligible for market making on the exchange should be forwarded to SEBI for information and any subsequent changes in the scrips should be incorporated in the Monthly Development Reports of the exchanges.
M. D. PATEL
