Sebi releases price band framework for trading on first day after IPO
The decision has been taken after discussions with stock exchanges and Sebi’s Secondary Market Advisory Committee (SMAC), said the regulator in a circular.
Published: 12th April 2023 10:28 AM | Last Updated: 12th April 2023 10:28 AM | A+A A-
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MUMBAI: In a move aimed at checking the irregular fluctuations in stock prices, the Securities and Exchange Board of India (Sebi) on Tuesday released a new framework for fixing the price band for trading in shares on the first day of listing after an initial public offering.
The decision has been taken after discussions with stock exchanges and Sebi’s Secondary Market Advisory Committee (SMAC), said the regulator in a circular. “Stock Exchanges are directed to take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations,” noted the circular. For trading on the first day pursuant to Initial Public Offering (IPO) or re-listing, Sebi said that call auction sessions would continue to be conducted separately on individual exchanges and orders would be matched by respective exchanges after computation of equilibrium price.
In case the difference in the equilibrium price between exchanges in percentage terms is more than the applicable price band for the scrip, a Common Equilibrium Price (CEP) would be computed by exchanges.
‘’The CEP would be the volume weighted average of equilibrium prices on individual exchanges as determined by the call auction,’’ the regulator said.
Sebi said the exchanges would set this CEP in their trading systems and apply uniform price bands based on the CEP. Further, only unexecuted pending orders from call auction sessions would be carried forward to the normal market segment. The move came after Sebi observed that call auction sessions are conducted on multiple stock exchanges and that the discovered price or equilibrium price following such sessions could be different on each exchange.
Call auctions continue to be conducted separately
For trading on first day pursuant to IPO, Sebi said call auction sessions will continue to be conducted separately on exchanges and orders will be matched by respective exchanges after computation of equilibrium price
