SEBI's new norms for liquidity enhancement scheme of bourses

SEBI's new norms for liquidity enhancement scheme of bourses

MARKET regulator SEBI on Wednesday limited the period of liquidity enhancement schemes of stock exchanges to a maximum of three years. The Securities and Exchange Board of India (SEBI) in February
last year had allowed stock exchanges
to introduce incentive schemes for brokers and intermediaries to enhance liquidity in illiquid securities in the equity cash and derivative segments.
Under the scheme, brokers and other market intermediaries are given incentives for a specified period of time to bring in liquidity and generate investor interest in securities which have limited trading activity.
In a circular issued yesterday. SEBI said that the liquidity enhancement schemes would have to be "objective, transparent, non-discretionary and non-discriminatory".

The scheme would not compromise on market integrity or risk managcmeni. SEBI said liquidity enhancement schemes would have

the prior approval of the stock exchange's board. Besides, the implementation and outcome of the scheme would be monitored by the board at quarterly intervals. Also, the scheme is required to

specify the incentives available to market makers/liquidity providers and such incentives include discount as well as adjustment in fees in other segments, cash payment or issue of shares, including options and war-ranis. The effectiveness of the scheme would be reviewed by the exchanges every six months and they would submit half-yearly reports to SEBI.

The regulator said the schemes could be discontinued at any lime with an advance notice of 15 days.

It said that the outcome of the scheme like incentives granted and volume achieved on the market maker and securitywise would be disseminated on a monthly-basis.

Posted in: News 2014