A Market Making Agreement ensures liquidity by obligating market makers to buy and sell a company’s shares at specified prices on the stock exchange.
A Market Making Agreement is a formal arrangement between a company and a SEBI-registered market maker, often during an SME IPO.
The market maker agrees to provide continuous buy and sell quotes for the company’s shares on the exchange for a specified period (usually 3 years), ensuring liquidity and reducing price volatility.
This agreement is mandatory for SME-listed companies to boost investor confidence and facilitate smoother trading. Market makers help maintain an active market, especially when trading volumes are low.
The company typically compensates the market maker for their services through a fee or a portion of shares. This agreement ensures that investors can easily enter or exit positions in SME stocks.
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