SMEs may get NSE trading platform soon

The National Stock Exchange (NSE) is chalking out a strategy to launch a separate trading platform for small and medium companies (SMEs).

The move is expected to cut into the business of rival Bombay Stock Exchange (BSE).

The NSE joins Inter-Connected Stock Exchange, a trading platform created by 13 regional stock exchanges and financial technologies, in proposing an SME share trading platform. The 13 regional stock exchanges and financial technologies are also promoters of commodities exchange MCX.

The NSE's proposal is also aimed at encouraging a large number of smaller companies to raise funds through the new issue or initial public offering (IPO) route to meet growth plans, sources close to the development said.

When contacted, an NSE spokesman said: "We have no comments to offer."

Currently, only those companies with a minimum paid-up equity capital of Rs 10 crore and a market capitalisation of Rs 25 crore or above are eligible to list on the NSE.

This had prevented several companies from getting themselves listed on the NSE, which already accounts for an average turnover of Rs 7,000 crore in the cash segment "" more than double of the BSE's average of just over Rs 3,000-crore. In the derivatives segment, the NSE is almost a monopoly accounting for more than 90 per cent of the trading volumes.

Among the global exchanges, London Stock Exchange's Alternative Investment Market (AIM) is the most successful platform after it attracted a large number of companies from across the globe, including India in recent times, for raising resources through the IPO route.

The strategy by the NSE, in which the New York Stock Exchange holds 5 per cent stake, is aimed at automatically allowing the large number of small companies that are listed BSE and regional stock exchanges to the proposed new SME trading platform.

Though 4,800-odd companies are listed on the BSE, only about 2,600 are actively traded. About 1,080 scrips are actively traded on the NSE.

By allowing the smaller companies to list on the new platform, the NSE is already looking at a big set of companies, perhaps 1,500 that are already active on the BSE.

The NSE's initiative comes after the SME trading platform of the BSE, the BSE IndoNext did not perform to expectations. The small companies to be listed on the BSE is required to have a minimum post-issue capital of Rs 3 crore and a minimum market cap of Rs 5 crore.

The Over-the-Counter Exchange of India (OTCEI), created exclusively for small companies, has also been less than successful, despite at least two attempts to revive it.

The new NSE proposal comes after the Security and Exchange Board of India (Sebi) rejected a similar plan by the exchange.

Sources said the regulator was now even more keen to create a separate trading platform exclusively for the SMEs, especially since several of the regional stock exchanges where these stocks were listed, are more or less defunct.

Sources said once the companies grow bigger (Rs 25 crore market-cap and above), the NSE would put them on its main trading platform.