The Securities and Exchange Board of India (SEBI) is preparing a comprehensive review of the rules governing small and medium enterprise (SME) listings, after identifying problems related to trading, market making, underwriting, costs and migration to the mainboard.
Sebi chairman Tuhin Kanta Pandey said the existing framework could be restricting the growth of companies listed on the SME platform. Speaking to reporters on the sidelines of the 23rd FICCI Capital markets Conference 2026 in Mumbai on Wednesday, he said the regulator would issue a consultation paper as part of a broader reform exercise.
Pandey said the creation of odd lots had made it difficult for investors to trade SME shares. Sebi had increased the trading lot and application size to limit retail participation, but the measure had not achieved its intended purpose, he said.
The regulator is also examining the market-making system, which Pandey said was not functioning properly even as the costs for market makers continued to rise. The underwriting mechanism also required attention, as it was not working effectively and was imposing high costs on companies.
SME-listed companies face substantially higher expenses than firms on the mainboard, Pandey said. Sebi would therefore consider ways to prevent companies on the SME platform from bearing such a cost burden.
The rules governing migration from the SME platform are another area under review. Pandey said certain requirements were linked to paid-up capital and would need to be reconsidered, including the possibility of delinking them from paid-up capital.
Sebi will also publish a more detailed study on futures and options (F&O) trading using data from the 2025-26 financial year. The analysis will examine retail and non-retail participation across different categories of market participants, as well as the effectiveness of measures introduced by the regulator.
Pandey said Sebi was seeking to ease rules for global fund management from India. Although several changes had already been made to tax laws, some issues connected with portfolio management services regulations remained.
The regulator has proposed changes in a consultation paper aimed at easing certain requirements and encouraging more global fund management activity from India.
