Can MSEI Finally Restart Trading?

For long-term investors in the Metropolitan Stock Exchange of India Limited (MSEI), one question has remained unanswered for years:

“When will the exchange actually revive?”

On 8 January 2026, MSEI released a circular attempting to answer this question—not through promises, but through a market structure.

It’s called the Liquidity Enhancement Scheme (LES).

Let’s break down why this circular matters, what has changed on the ground, and whether this can genuinely restart the exchange or is just another experiment.

A) The Core Problem MSEI Has Always Faced

Exchanges don’t fail due to a lack of listings—they fail because nobody trades.

MSEI’s biggest challenges have been:

• Thin or non-existent order books

• Wide bid–ask spreads

• No certainty of entry or exit

• Low confidence among retail and institutional investors

This created a vicious cycle:

• Investors avoided the exchange due to low liquidity

• Low liquidity kept volumes depressed

• Depressed volumes discouraged brokers and market makers

LES is designed to break this cycle from the liquidity side, not through marketing or branding.

B) What Exactly Is the Liquidity Enhancement Scheme?

Under LES, MSEI will pay professional market makers to continuously provide buy and sell quotes—ensuring visible liquidity for investors.

This is standard practice in serious exchanges globally. But for MSEI, it’s the first large-scale, incentive-driven attempt to institutionalize liquidity.

C) The Most Important Shift: Mandatory Two-Way Markets

Under LES, the rules are clear:

Designated Market Makers must provide both buy and sell quotes.

Quotes must be present for 85–90% of market hours.

Single-side quotes are not acceptable.

Why this matters:

• Investors can exit positions more easily.

• Prices remain stable and are not affected by one-sided orders.

• Trading becomes more predictable and less speculative.

• Liquidity is no longer optional. It’s now a mandatory part of market operations.

D) Depth Matters More Than Just Quotes

MSEI hasn’t stopped at “best bid–best ask.”

Market makers must quote across five levels of the order book, with increasing value commitments:

This is crucial because:

• It creates real depth, not just cosmetic liquidity.

• Large orders don’t distort prices.

• Volatility reduces naturally.

This is how exchanges protect investors during sudden buying or selling pressure.

E) Tight Bid–Ask Spreads = Lower Hidden Costs

LES also caps the maximum bid–ask spread:

• As low as 5 basis points on the top level

• Gradually increasing at deeper levels

Why this matters:

• Investors lose less money while entering and exiting.

• Arbitrage gaps reduce.

• Price discovery becomes efficient.

Liquidity is not just about volume—it’s also about fair pricing.

F) The Incentive That Changes Everything

₹40 lacs per month per market maker.

This is not symbolic. It’s serious money.

Additional benefits:

• Zero exchange transaction charges for trades under the scheme.

• Monthly payouts based on daily compliance.

This incentive:

• Makes market making economically viable.

• Attracts serious, tech-driven trading members—not casual participants.

G) Why the Stock List Is Strategically Important

The scheme includes 130 high-quality, widely followed stocks, including:

• Large banks and financials

• PSU majors

• IT, FMCG, metals, auto

• New-age names like Swiggy, Meesho, Lenskart

Why this matters:

• Liquidity must start with familiar names.

• Investors compare prices with NSE/BSE instantly.

• If prices converge, confidence follows.

• Trust in liquid names leads to organic activity expansion.

H) What This Means for Investors in MSEI

This circular matters for MSEI shareholders because it reflects structural intent—not cosmetic intent.

Instead of:

• Press releases

• Rebranding

• One-off announcements

MSEI is investing in:

• Market depth

• Execution certainty

• Price discovery

These are the foundations of a functioning exchange.

I) But Will This Alone Restart the Exchange?

Short answer: Not immediately—but it’s a necessary first step.

LES can:

• Improve screen liquidity

• Bring back active brokers

• Restore basic trading confidence

But for a full revival, MSEI will still need:

• Sustained participation beyond incentives

• Regulatory support continuity

• Broker ecosystem expansion

• Product innovation over time

Liquidity can be bought initially. Trust has to be earned gradually.

J) The Big Takeaway for Long-Term Investors

This scheme does not guarantee success.

But it does confirm something important:

MSEI is no longer ignoring its core weakness.

For investors who have stayed invested hoping for a restart, LES is the strongest operational signal so far that the exchange wants to compete on market quality—not narratives.

The real test will be:

• Execution consistency

• Who steps in as market makers

• Whether liquidity sustains once incentives taper

If that happens, this circular may be remembered as the point where MSEI stopped talking about revival—and started engineering it.