The International Financial Services Centres Authority on 31st March 2022 has decided to review the Liquidity Enhancement Scheme (LES) being operated in IFSC. The Stock Exchange may introduce liquidity enhancement schemes in any security/ listed products.
The scheme shall have the prior approval of the Governing Board of the Stock Exchange and its implementation and outcome shall be monitored by the Board at quarterly intervals and it shall specify the incentives available to the market makers /liquidity providers and such incentives may include discount in fees, adjustment in fees in other segments, cash payment or issue of shares, including options and warrants.
The scheme, including any modification therein or its discontinuation, shall be disclosed to the market atleast 15 days in advance.
The Stock Exchange shall create a reserve specifically to meet incentives/expenses of the Liquidity Enhancement Scheme, based on the normative study of the LES in the domestic market and such reserves shall not be included in the calculation of net worth.
Further the Stock Exchanges shall formulate their own benchmarks for selecting the securities for liquidity enhancement with the broad objective of enhancing liquidity in illiquid securities.
a) The Stock Exchanges shall introduce liquidity enhancement schemes on any security for a maximum period of five years. Once the scheme is discontinued, the scheme can be re-introduced on the same security provided it is less than the five year period since the introduction of scheme on that security.
b)Further, a Stock Exchange may introduce liquidity enhancement schemes in securities where liquidity enhancement scheme has been introduced in another Stock Exchange. Such schemes cannot be continued beyond the period of liquidity enhancement schemes of the initiating Stock Exchange.
c)The list of securities eligible for liquidity enhancement shall be disseminated to the market.
