New Delhi, Aug. 19 -- India's market regulator is considering an overhaul of rules governing the small and medium enterprise (SME) market, including removing rules that restrict listings and make shares in the segment easier to trade.

The review comes as the Securities and Exchange Board of India (Sebi) grapples with a market-making framework that has failed to deliver enough liquidity while adding costs for companies, and with trading rules that can leave investors holding shares they cannot easily sell.

"The market-making framework is not working properly. And the cost is increasing due to that market-making. The underwriting system is not working. And it should be given a lot of cost. So it is becoming more costly than the main board...