**Summary:**
This circular, issued by the Securities and Exchange Board of India (SEBI) on September 1, 2021, revises guidelines for Liquidity Enhancement Schemes (LES) in the equity cash and equity derivatives segments. The circular modifies clauses 3.1 and 4.1 of the earlier circular CIR/MRD/DP/14/2014 dated April 23, 2014. Key changes include:
* The LES requires prior approval from the Stock Exchange's Governing Board, valid for one year, with yearly renewals permissible as long as the scheme operates. The Governing Board must monitor implementation and outcomes quarterly.
* Stock Exchanges can introduce LES on any security, and schemes can be reintroduced on the same security after discontinuation.
These revisions are also applicable to existing schemes. All other conditions prescribed in the SEBI circular dated April 23, 2014, remain unchanged. Stock Exchanges are directed to implement the changes, amend bylaws accordingly, and disseminate the information to stockbrokers, trading members, and on their websites. This circular is issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, and Section 10 of the Securities Contracts Regulation Act, 1956, to protect investor interests, promote development, and regulate the securities market. The circular is available on the SEBI website (www.sebi.gov.in). For further information, contact Amit Kapoor, General Manager, Market Regulation Department, at amitk@sebi.gov.in.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body for the securities market in India; issuer of the circular.
Equity Cash Segment: One of the segments in which the Liquidity Enhancement Scheme is applicable.
Equity Derivatives Segment: One of the segments in which the Liquidity Enhancement Scheme is applicable.
Liquidity Enhancement Scheme: Scheme designed to enhance liquidity in illiquid securities, subject of the revised guidelines.
CIRMRDDP142014: SEBI circular number related to the initial guidelines for the Liquidity Enhancement Scheme.
Governing Board of the Stock Exchange: Entity responsible for approving and monitoring the Liquidity Enhancement Scheme.
Securities and Exchange Board of India Act, 1992: Act under which SEBI's powers are conferred.
Securities Contracts Regulation Act, 1956: Act referenced for the powers exercised in issuing the circular.
भारतीय (cid:7079)ितभिू त और िविनमय बोड(cid:6981)
Securities and Exchange Board of India
CIRCULAR
SEBI/HO/MRD/DSA/CIR/P/2021/623 September 1, 2021
All Recognised Stock Exchanges
Dear Sir / Madam,
Subject: Revised guidelines for Liquidity Enhancement Scheme in the Equity Cash
and Equity Derivatives Segments
1. SEBI vide circular CIR/MRD/DP/14/2014 dated April 23, 2014 permitted stock
exchanges to introduce liquidity enhancement schemes in the equity cash and equity
derivatives segments to enhance liquidity in illiquid securities.
2. Based on the experience of stock exchanges, it has been decided to modify clause 3.1
and 4.1 of said Circular as under:
“3.1 The Scheme shall have prior approval of the Governing Board of the Stock
Exchange which will be valid for one year. The Governing Board of the Stock Exchange
may give yearly approval till the time the scheme is in operation. Further, its
implementation and outcome shall be monitored by the Governing Board at quarterly
intervals.
4.1. The Stock Exchange shall introduce liquidity enhancement schemes on any
security. Once the scheme is discontinued, the scheme can be re-introduced on the
same security”.
3. The above will also be applicable to existing schemes. Other conditions prescribed in
aforesaid SEBI Circular dated April 23, 2014 shall remain unchanged.
4. Stock exchanges are directed to:
4.1. take necessary steps and put in place necessary systems for implementation of
the above.
4.2. make necessary amendments to the relevant bye-laws, rules and regulations for
the implementation of the above decision.
4.3. bring the provisions of this circular to the notice of the stock brokers/ trading
members of the stock exchanges and also disseminate the same on its websites.भारतीय (cid:7079)ितभिू त और िविनमय बोड(cid:6981)
Securities and Exchange Board of India
5. This circular is issued in exercise of powers conferred under Section 11 (1) of the
Securities and Exchange Board of India Act, 1992 read with Section 10 of Securities
Contracts (Regulation) Act, 1956, to protect the interests of investors in securities and
to promote the development of, and to regulate the securities market. This circular is
available on SEBI website at www.sebi.gov.in.
Amit Kapoor
General Manager
Market Regulation Department
Email: amitk@sebi.gov.in