SEBI Asserts New Terms For The Listing Day (23-Jan-2012)
In light of high volatility and price movement observed on the first day of trading, the Securities and Exchange Board of India (SEBI) has asserted additional controls for initial public offers (IPOs) and relisted scrips to curb excessive volatility on the listing day.
Going by the data of listings in calendar 2011, there has been average price volatility of close to 65% in 38 IPOs. Indeed, IPOs which saw the maximum volatility were all small ones, including Birla Pacific Medspa (Rs 65 crore issue that saw 206% movement over the issue price), PG Electroplast (150%), Shekhawati Poly-Yarn (128%) and M&B Switchgears (128%).
The market regulator has extended the call auction mechanism for price discovery to IPOs and relisted scrips, apart from placing price bands during the normal trading session on the first day of trading. Currently, the call auction mechanism is applicable only to Sensex and Nifty stocks.
As per the new norms, during the call auction which would take place from 9 am to 10 am, the first 45 minutes shall be allowed for order entry, order modification and order cancellation. Subsequent 10 minutes would be for order matching and trade confirmation and the remaining five minutes shall be the buffer period. The normal trading session on the listing day would take place subsequent to conclusion of the one-hour 'call auction' session for scrips on the BSE and the NSE.
The regulator has also put in place a price band of 5% (of equilibrium 'discovered' price or issue price if price discovery has not happened) for all scrips where issue size is less than Rs 250 crore and those which have got relisted. Additionally, these scrips would be placed in the trade for trade (TFT) segment, where one must pay immediately to take delivery, for the first 10 days. For new listings with an issue size of more than Rs 250 crore, the price band applicable would be 20%. Speeding the development, the market regulator has instructed that these provisions should be implemented in the next four weeks.
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