EMERGE is the SME platform on the NSE and is an initiative of the exchange along with some of its founders like IDBI. IDBI through its SME arm SIDBI and its broking division IDBI Capital Market Services Limited has been doing a good job to bring these small and medium enterprises or SME to the capital market arena. The platform being provided by the two exchanges NSE and BSE helps in fund raising and providing the access to raise money.

There are a few unique features of SME and the foremost among them is the concept of market making. The primary duty of the market maker is to provide quotes for a minimum of 75% of the time for which trading is permitted. NSE offered the option of two types of trading where in the first there would be a pre-open and then order matching and that is the end of trading.This is like the pre-open that we have on the exchanges every morning. The second is normal continuous trading.

Various intermediaries have requested the company, the exchange and the merchant bankers who are also the market makers to change the system of trading from the periodic call auction once a day to continuous trading. Individually everybody agrees and has no objection that to improve the visibility and facilitate trading and better price discovery there should be continuous trading. However here lies the catch. Why should the market maker change the system of trading and kill the golden goose. For doing virtually nothing he is being paid market making charges while if there is continuous trading there is a risk of being bought out or price being hammered.

Here is a case of a company Thejo Engineering Limited which has good fundamentals and everything that would interest an investor in it. If I may add the company does not offer too much of room for criticism and a person like me who is choosy did not find fault with the company other than the system of trading. The share is trading since September 2012 and has issued bonus shares in the ratio of 1 for one and yet the share price is still around the issue price.

There can be only one reason for the debacle of the company’s share price, it is the system of trading. The reluctance of the market maker to change the system of trading is more than obvious and if it wants better price discovery it must insist that the system of trading be changed or change the market maker.

Let’s hope that in this festive season where Dussehrahas just ended and Diwali is less than three weeks away, there will be light and victory of good over evil where the investor will benefit.