Introduction:

Stock exchanges are the organized market place where trading of shares and other financial securities is carried in terms of sales and purchase. It is also regarded as the barometer of the economy. The regulatory body i.e. Securities Exchange Board of India (SEBI) imposes rules and regulations on the firms, investors and brokers to carry out the trading. There are 23 stock exchanges in India out of which NSE and BSE are the major ones. National stock exchange happens to be the largest stock exchange in India and worlds third largest stock exchange in terms of transaction. It was incorporated in 1992 and is located in Mumbai. NSEs premier is called NSE NIFTY. It is the performance index of the 50 most favored stocks across 21 sectors of the country. Each company has its own weight and the weighted average of the value of the stocks makes the value of NIFTY index. Bombay stock exchange is the oldest stock exchange in India established in 1875 it is also located in Mumbai. BSE is the second largest stocks exchange in terms of stock listing. Its premier index is called SENSEX. It is the performance index of 30 blue-chip companies, which has its own weight-age in the value of the index and the weighted average of the value of the stocks derives the value of BSE sensex. As the number of the companies in BSE is lesser, the volatility is higher than NIFTY index. Role of stock exchanges: Mobilizes savings. Promotes capital formation. Provides more Investment avenues. Liquidity of investment. Channelizes funds for development purposes. Provides safety to the investment. Wide marketability to securities. Provides financial resource for public and private sectors etc

Moreover, apart from these exchanges efforts had been made to fulfill the needs of the Small and Medium Enterprises. In the same context, a separate exchange for Small and Medium Enterprises i.e. OTCEI was established in 1989 & a new platform on BSE was launched in year 2005 but both these efforts failed to rake-in the desired results. However, for the concern of the industry (SMEs) the policy makers are planning to launch a separate platform for SMEs i.e. BSE SME. Towards this end, BSE & SEBI has already given the green signal for SME exchange. Background: Small and Medium Enterprises (SMEs) are the backbone of the Indian economy as 45% of the industrial inputs and 40% of exports are contributed by them. Moreover, by employing 60 million people, they are the second largest employer in the country after agriculture and create 1.3 million new jobs every year. Nearly 12 million people are expected to join SMEs workforce in coming 3 years. SMEs manufacture more than 8000 quality products for both domestic and international market across all the industries. The contribution of SMEs towards the GDP is 17% in 2011 and is budgeted to 22% by 2012. According to All India Census of Micro, Small & medium Enterprises (MSMEs) of 2006-07, the number of registered and unregistered MSMEs in India are 26100797, of which only 6% are registered. The maximum numbers of MSMEs are in Uttar Pradesh with 13%. SMEs are the showcase of the spirit of the Indian entrepreneurship. It is all about the frugality in the business and survival against all odds. They are now exposed to greater opportunities for expansion and diversification. The SMEs are also foraying in sectors which were untapped earlier. This is reflected in the form of their increasing number and progress in overall product manufacturing, technology, employment, innovation and promotion of entrepreneurial abilities. In such scenario raising capital has evolved as the most critical need of the capitalstarved SMEs. Need for a separate SME exchange: The current sources of financing SMEs are inadequate as they dont have an easy access to the funds from venture capitalists, Angel investors or Private equity

investors. Most of the options for SMEs to raise funds carry fixed charge which becomes burdensome during liquidity crunch. The need for separate platform/exchange for SMEs has been discussed since 2007, with the idea that it will enable SMEs to access capital markets easily, raise capital quickly and at lower cost. Moreover, it will also provide focused, better and effective services to the paralyzing SME sector. In addition, it will also help in distributing the risk involved with the SMEs and provide alternate source of funding. SME exchanges outside India: The concept of separate platform/exchange for SMEs or high growth potential firms is not new. Internationally many stock exchanges such as AIM (London), TSXV (Canada), GEM (Hongkong), MOTHERS (Japan), KOSDAQ (Korea) & NASDAQ (US) etc. are facilitating the listing of securities of growth/new economy companies or SMEs. AIM (Alternative Investment Market) was established in 1995. It is a trading platform on London Stock Exchange which allows SMEs to raise capital by floating shares in the market. Till date, it has raised funds for more than 2200 companies. It provides entry ease coupled with fewer regulations. Moreover, there is no preevaluation process for SMEs by the regulators. With its immense success and low regulatory burden AIM has started to become an international exchange. MOTHERS (Market of the high growth and emerging stocks) were established in 1999. It is a platform on Tokyo Stock Exchange for high growth startup companies. Till date, it has facilitated more than 180 companies to raise fund by floating their shares in the stock market. However, there are rules and regulations which have been imposed by the regulator and it is a mandate for the companies to adhere them. Apart from high growth potential, the company must offer more than 500 trading units at the time of application and should have at least 2000 trading units at the time of listing. Moreover, the company must have at least 1 year of continuous business record before listing. GEM (Growth Enterprise Market) is a separate dedicated stock exchange for the growth enterprises in Hongkong. This operates on the philosophy of buyers beware and let the market decide. Therefore, it has been introduced for professional and informed investors. The exchange mandates the aspiring firm to disclose its past business happenings and future growth and diversification plans.

The exchange also puts regulations on timely comparisons of the business progress with the budgeted plans. It also assures at the time of listing, the firms should have efficient corporate governance. However, it doesnt assess the commercial feasibility of any applicant.

A model has been created wherein the numerous High Net worth Individuals of our country would have an opportunity to invest in businesses which they would like to promote within an environment which allows them to establish better controls, safety and an exit opportunity.