Market Makers in an SME IPO and What do They Do?

This IPO News market update covers “Market Makers in an SME IPO and What do They Do?”. The page is organized around who are market makers in sme ipos?, who can become a market maker? eligibility criteria, bse and nse emerge market makers, market maker reservation portion, how do market makers provide liquidity in sme stocks?. IPO News presents the structured facts and tables in its own layout and wording.

Topics Covered

• Who are market makers in SME IPOs?
• Who can become a market maker? Eligibility Criteria
• BSE and NSE Emerge Market Makers
• Market Maker Reservation Portion
• How do market makers provide liquidity in SME stocks?
• Market Makers Roles and Responsibilities
• Market Maker Bid-Ask Spread Requirements
• Market Making Agreement
• Market Maker Inventory Level
• Benefits of Market Making
• In a Nutshell
• SME IPO Enquiry
• Frequently Asked Questions
• 1. Who can become a market maker?−
• 2. How do market makers earn profits?+
• 3. How many market makers can a SME IPO have?+
• 4. What is market making in SME IPO?+
• 5. How do I change market maker in SME IPO?+
• 6. Is market making compulsory for SME IPO?+
• 7. What do market makers do in SME IPO?+
• Compare Stock Brokers Side-by-Side

Key Facts

• India's trusted financial research platform since 2015. Live IPO GMP, subscription data, allotment status, Rights Issues, NCDs and unbiased stock broker reviews.
• SEBI's ICDR regulations require all SMEs to enter into the market making arrangements for at least 3 years after listing.
• The registered member must be a trading member of the capital market segment of the NSE.
• Market makers must have a minimum net worth of Rs 1 crore when registering with the exchange or acting as a market maker.
• You can find BSE SME and NSE SME market makers list on the exchange website. Click on the link provided below;
• BSE SME Market Makers List
• NSE Emerge Market Makers List
• Create a market for SME stocks: Market makers create a market for SME shares by providing two-way quotes for 75% of trading hours from the day of listing. They ensure continuous buying and selling activity in SME shares.
• Bid-ask spread: The bid-ask spread shall be in accordance with the market maker spread requirements specified by the Exchange and SEBI from time to time. (See below)
• A company can appoint a minimum of 1 and a maximum of 5 market makers for its shares.
• After 3 months of market making, the market makers are exempted from providing quotations, if the market makers' inventory reach 25% of the issue size, including the shares allocated to the market maker.
• Market makers are only responsible for facilitating liquidity through 2-way quotes, but not for maintaining the share price.
• The above exemption limit is subject to change by SEBI and the stock exchange from time to time.
• To provide 2-way eligible quotes, market makers collect and analyze all the necessary information about the scrip.
• Suppose an IPO 1 trading lot size is 4000 shares and the market maker places buy order at Rs 25 and quotes a sell order at Rs 26.25, so the bid-ask spread of 1.25/share is the profit.
• Buy value = 4000 shares * Rs 25 = Rs 100,000
• Sell value = 4000 shares * Rs 26.25 = Rs 105,000
• Total Profit to market maker = 1,05,000 – 1,00,000 = Rs 5,000
• Profit % to sale = Rs 5,000 / 1,05,000*100 = 4.76%
• Yes, SEBI ICDR Regulations mandates it for SMEs going public to have market making arrangement for minimum 3 years of period since the day of listing.
• BSE SME IPO Eligibility Criteria
• SME IPO Listing Platforms BSE SME and NSE Emerge
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• SEBI's New Norms for SME IPOs: Key Changes and Implications on SMEs
• NSE Emerge SME IPO Eligibility Criteria

Data Tables

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