106 J. (1) The merchant banker shall ensure compulsory market making through the stock
brokers of SME exchange in the manner specified by the Board for a minimum period of three years from the date of listing of specified securities issued under this Chapter on SME exchange or from the date of migration from Main Board in terms of regulation 199[106T], as the case may be.
(2) The merchant banker may enter into agreement with nominated investors for receiving or delivering the specified securities in the market making subject to the prior approval by the SME exchange where the specified securities are proposed to be listed.
(3) The issuer shall disclose the details of arrangement of market making in the offer document.
(4) The specified securities being bought or sold in the process of market making may be
transferred to or from the nominated investor with whom the merchant banker has entered into an agreement for the market making:
Provided that the inventory of the market maker, as on the date of allotment of the specified securities, shall be at least five per cent. of the specified securities proposed to be listed on SME exchange.
(5) The market maker shall buy the entire shareholding of a shareholder of the issuer in one lot, where value of such shareholding is less than the minimum contract size allowed for trading on the SME exchange:
Provided that market maker shall not sell in lots less than the minimum contract size allowed for trading on the SME exchange.
(6) Market maker shall not buy the shares from the promoters or persons belonging to promoter group of the issuer or any person who has acquired shares from such promoter or person belonging to promoter group, during the compulsory market making period laid down under sub-regulation(1).
(7) The promoters‘ holding shall not be eligible for offering to the market maker under this Chapter during the period specified in sub-regulation (1):
Provided that the promoters‘ holding which is not locked-in as per these regulations can be traded with prior permission of the SME exchange, in the manner specified by the Board.
(8) Subject to the agreement between the issuer and the merchant banker/s, the merchant banker/s who have the responsibility of market making may be represented on the board of the issuer.
SEBI (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2011, w.e.f. 23.09.2011