As part of its new norms for passive funds, SEBI wants mutual funds to mandatorily appoint two market makers for exchange-traded funds (ETFs). Why do ETFs need market-markers? Retail investors can't just walk into a fund house's office and get units. Market makers create these ETF units by exchanging it with the underlying basket of securities (shares or bonds). Retail investors can't create units. Market makers also create the liquidity of units on exchanges, so it's easier for you to buy ETFs, at prices closest to its actual net asset value. SEBI wants mutual funds to incentivise market makers within the schemes' permissible limits of total expense ratio.