After putting in place the measures last week for checking volatility on the listing day, the Securities and Exchange Board of India (Sebi) is set to come out soon with a modified IPO process for ensuring all-India participation in this critical market segment.
A senior Sebi official told Business Standard that the market regulator had set itself for completing its three-stage IPO reform as quickly as possible by overhauling the IPO process itself with an eye on cutting down on listing time to the minimum possible and enhancing retail participation.
The three stage strategy envisaged by Sebi to streamline and institute deterrent measures to curb wrongdoings started with action in the previous cases of manipulation.
The official said that with the announcement of measures on Friday to curb IPO manipulations on the listing day, the second stage of the market regulator’s strategy.
“Third stage is bringing in comprehensive changes in the whole IPO process. The committee set up for this purpose has already started consultations. The panel is looking at the ways to reduce listing time for the IPOs and also steps to ensure participation of people from as many cities as possible in them,” he added.
The official said that up till now, subscription in the IPOs was limited to few cities, and added that measures would be in-built in the new IPO process to enhance retail participation.
He stressed that the steps to curb volatility on the listing day announced this week will ensure that the realistic price is reached within an hour, and then, subsequently, the regulator will have a good reference level to take action and violators will have little window to do any manipulation.
Under the new norms, circuit filters will come into play on the listing day itself. The new rules, which will take effect four weeks from now, will also include extending the 'pre-market call auction' window on listing day and delivery-based trading for first ten days.
Unlike index stocks, where the window is for 15-minutes, IPO stocks will have a one hour window between 9:00 and 10:00 am. The first 45 minutes will be for order entry, modification and cancellation, the next 10 minutes for order matching and trade confirmation and while the remaining five minutes shall be the buffer period to facilitate the transition from pre-open session to the normal trading session.
In case equilibrium price is not discovered for re-listed stocks, all orders shall be cancelled and the scrip shall continue to trade in call auction mechanism until price is determined. For IPO scrips with issue size of less than Rs 250 crore and re-listed scrips, 100 per cent margin shall be required for the order to be eligible in the pre-open session.
