The Securities and Exchange Board of India (Sebi) was planning to reduce the time for investors to apply for an Initial Public Offer (IPO) through the Asba mode, Chairman C B Bhave said today.
Applications Supported by Blocked Accounts (Asba) is a system that allows investors to apply for an IPO, keeping the application money in their bank accounts till the finalisation of the allotment.
“We are examining the feasibility of doing this,” Bhave told reporters here.
Currently, it is a 21-day process and the financial transactions are structured in such a manner that an investor has to pay on the first day when applying for an IPO and the return comes to him after 30 days with the money getting blocked.
However, with the introduction of the new system, retail investors, whose IPO application money is often blocked, would be able to complete procedures in one week, he said.
The investors would benefit because they do not need to pay anything upfront. So, cash would not be required to be paid immediately. The time and costs involved in waiting to get the refunds and then crediting them to the account would be eliminated altogether under the new system.
Currently, in India, only about 20 per cent of retail investors use this system, despite banks implementing it. “India is a vast country and we want it to increase it further,” Bhave said.
Besides, he said, action would be taken against those companies which had violated the norms for obtaining 2G spectrum.
“Sebi looks into those areas where there is a violation on the capital market... If there is any such violation, we will look into it,” Bhave said.
He said the market regulator would always keep its “eyes” and “ears” open on the capital market, and if there is any violation, it would intervene in it.
About high frequency trading practices in India, he wanted to know whether high frequency trade by itself was a problem or the structure of exchanges were a problem.
“We have looked at some exchanges in other countries... they have given access to some members... something like they can see the order ahead of other members. I do not think that is a good idea,” he said.
High Frequency Trading is a programme trading platform that uses powerful computers to transact large number of orders at very fast speeds. It uses complex algorithms to analyse multiple markets and execute orders based on market conditions for making huge profits.
It also helps brokerages execute transactions at a high speed, using co-location services.
Bhave was here to take part in the valedictory of a three day seminar, CRESCITA-2010, organised by Bharatidasan Institute of Management, Tiruchirapalli.
