There is need for aggressive focus to bring more SMEs in the capital markets: BSE Chairman

Small to medium enterprises (SMEs) have seen high number of listings through the SME platform of the exchanges in recent times, leading to high value of funds raised through the primary markets. Prof. Subhasis Chaudhuri, Chairman, BSE believes that the exchanges and the market participants need to focus aggressively on bringing more SMEs in the capital markets to satisfy their capital requirements. Speaking at the Financial Express Modern BFSI Summit held in Mumbai, Chaudhuri said that capital through primary markets can help SMEs to transition to MSMEs (Micro, Small and Medium Enterprises) and beyond, which can help to substantially increase their contribution to GDP per capita, depending on the productivity of their sector. He also added that while some companies moving to mainboard following mainboard listing may have failed, he hopes that efforts by market regulator and exchanges to solve issues like timeline for promoter exit, along with the use of latest technology will be helpful to increase success.

While talking about the issues around the closing auction session, Chaudhuri refused to give his preferred method to determine the settlement prices of derivative contracts on expiry day, but said that the use of volume-weighted average price is more meaningful and provides more statistical efficacy compared to using the price discovered using order matching.

BSE Chairman also discussed the issues surrounding the use of AI agents to execute trade transactions and said that while this can be possible in the future, currently the technology faces regulatory issues due to lack of guardrails. “Exchanges are not ready for this change currently. In order for use of agentic AI in trade transactions to succeed, it is very important to establish trust of individual and institutional investors by ensuring safety and transparency. Currently, these agents can be controlled by external entities using prompt engineering to do something other than what they are supposed to do, making it a loss for the user and the system,” he said.