Under the scheme, brokers and other market intermediaries are given incentives for a specified period of time to bring in liquidity and generate investor interest in securities, which have limited trading activity.
The move comes after the regulator noted that "an exchange in early years of its formation or commencement of business may not be able to generate profits or have free reserves from business operations".
Laying down the conditions for such exchanges, Sebi in a circular said the yearly incentive that an exchange can earmark for LES will not exceed 25 per cent of its audited net-worth as on the last day of the previous financial year.
Earlier, for calculation of incentives, net-profits of exchanges was taken into consideration.
The circular further said that the exchange is required to create a reserve specifically to meet its LES incentives and expenses.
However, "such reserves shall not be included in the calculation of exchange net worth".
The exchange will continuously comply with the minimum net-worth requirement as per market norms.