The country’s leading stock exchange Bombay Stock Exchange (BSE) has announced to launch Liquidity Enhancement Scheme (LES) in value subsidiaries from 26th August with an impetus to boost trade in the derivatives segment.
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.
Sebi said that the liquidity enhancement schemes would have to be “objective, transparent, non-discretionary and non-discriminatory”.
It is expected to encourage market participants to provide two way quotes and trade on BSE derivatives segment. It has also waived the transaction charges applicable to equity derivatives segment.
The scheme would not compromise on market integrity or risk management. The implementation and outcome of the scheme will be monitored by the board at quarterly intervals. SEBI said liquidity enhancement scheme would have the prior approval of the stock exchange’s board.
The regulator said the schemes can be discontinued at any time with an advance notice of 15 days. SEBI said that all market maker/liquidity enhancer orders/trades would have to be identifiable by the stock exchange.
“Any conflict of interest framework shall be put in place by the exchange for the liquidity enhancement scheme. Such a framework shall provide for obligation on the part of the market maker/liquidity enhancer to disclose any conflict of interest while participating in the scheme. The same shall be disclosed by the exchange on their website,” Sebi said.
The new guidelines won’t be applicable to securities listed on small and medium enterprise (SME) platform.