When most of the stock markets around the world are showing signs of uncertainty, the Indian stock brokers are not supporting the idea of a separate exchange for small and medium enterprises (SMEs).

"Since the SME sector is very unorganized investors feel they have an uncertain future. They exist today, but can be a non-existent entity tomorrow," said G. C. Mishra, franchisee of Bonanza Portfolio Ltd.

"Most of the investors look for credibility of a company. A stock exchange provides trading facilities to traders to trade stocks and other securities. And a trader who is looking to profit from the market has to have faith on the company where he is putting his money. So both SMEs and the SME exchange, when operational, will take time to create a positive image amongst investors that they are stable and matured enough to handle the existing uncertainties," Mishra added.

Another stock broker, Gaurav Gulia, Religare Enterprises Ltd. said, "In theory, it seems to be quite a good idea but the practical implementation needs to be seen."

"I believe that the major challenge in the path of the SME exchange would be how to maintain liquidity, OTCEI (Over the counter exchange of India) had a concept of market maker but that also failed. When even some stocks listed on BSE and NSE have no liquidity at all I do not know how they would get liquidity into the SME exchange," Gaurav said.

"Also, they would have to check investor grievance and compliances, most of the SMEs are not transparent so there would have to be checks introduced to make sure that number of companies do not vanish as they did in the 90s," Gaurav added.

World over, SMEs are recognized as an important constituent of the national economies, contributing significantly to the respective nation's economy.

Recognizing the importance of SMEs, which constitute an important segment of Indian economy in terms of their contribution to country's industrial production, exports, and creation of entrepreneurial base, the Market regulator Securities and Exchange Board of India has already approved an exchange for the SMEs to raise capital from the equity market.

"We will enable putting in place an exchange which will cater to the needs of the SMEs. This should hopefully happen in calendar year 2008. A large number of regional stock exchanges have come to us. But we are not too sure, given their track record, whether they are the right candidates to enable the SME sector to access equity capital having known that OTCEI is a failed exercise," SEBI Chairman M Damodaran said.

"We would start afresh, look at those that have the capability to set up this exchange, and in order to see that there is no fragmentation…we will not have more than one exchange to begin with and then, if the market grows to size, we may look at setting another exchange," he added.

Meanwhile the government has asked market regulator SEBI to frame separate norms while setting up the exchange for SMEs so that small and medium enterprises do not have to spend high on advertising for their public issues.

A senior official in the ministry of MSME who didn't want to be named said, "While setting up exchange for SMEs, the SEBI should come out with separate rules so that they do not have to incur high expenses on advertising for their public issues and reports to the investors."

He said the ministry would try to impress upon SEBI to ensure that these units do not have spend too much while raising funds from the market.

"The ministry will also submit the views of the industry to the regulator," he added.

When asked about the future of market, G C Mishra said, "the future of the market will be shining, as India is one of the highly growing economy of the world. The fundamentals are very strong and in long run it may add up more by the SME Exchange."