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The Securities and Exchange Board of India (SEBI) is planning a comprehensive review of the framework governing small and medium enterprise (SME) listings, with the regulator flagging difficulties related to trading, market making, underwriting and costs faced by companies on the SME platform.
Speaking to the media on the sidelines of the 23rd FICCI Capital Markets Conference 2026 in Mumbai on Wednesday, the SEBI Chairman Tuhin Kanta Pandey said some provisions of the existing SME framework are creating difficulties for companies and could be affecting their growth. "There are certain things about the SME framework which are actually curbing the organisations and enterprises that are on the SME platform. They are curbing their growth, and there are difficulties in their trading as well," the Chairman said. One of the issues highlighted was the creation of odd lots, which can make it difficult for investors to trade SME shares. "You have seen that odd lots have been created, because of which investors who have come into them are not able to trade," he said. The Chairman said increasing the trading lot and application size was intended to control retail participation in the SME segment, but the measure has not achieved the intended objective. "The thought was that if we increase the trading lot and increase the application size, we would be able to control retail participation, but that is not happening," he said. SEBI also flagged concerns around the existing market-making framework. According to the Chairman, the framework is not working properly, while the cost of market makers is increasing. The underwriting system is another area that needs attention, he said, adding that it is not working effectively and companies are having to bear significant costs. The Chairman also pointed out that companies on the SME platform face higher costs compared with those on the mainboard. "So, if someone is on the SME platform, obviously we do not want them to incur higher costs. But the cost is significantly higher compared with the mainboard," he said. Issues related to migration from the SME platform were also flagged. The Chairman said some requirements were linked to paid-up capital and these need to be reconsidered. "There are also issues with migration, and there were many things where capital was linked to paid-up capital. That also needs to be delinked, and needs to be thought about afresh," he said. SEBI plans to address these issues through a broader reform exercise. "So, we will bring a comprehensive reform proposal. A consultation paper will be issued for that," the Chairman said. The SEBI Chairman also said the regulator will release a more detailed study on futures and options (F&O) trading, covering FY26 data. The study will provide greater detail on retail and non-retail participation and examine what has been happening across different categories of market participants. He said the analysis will also look at the effectiveness of measures taken by SEBI. SEBI is looking to ease rules for global fund management from India. On global fund management activity from India, the Chairman said several changes have already been made in tax laws, while certain issues related to portfolio management services (PMS) regulations remain. He said SEBI has proposed changes in its consultation paper that could ease some of these requirements and encourage global fund management activity from India. (ANI)
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