SEBI Asks Exchanges To Set Common Equilibrium Price For Listing Day After IPO
Exchanges will have to calculate a common equilibrium price if there is difference between discovered prices on various exchanges.
The Securities and Exchange Board of India asked the exchanges to set a common equilibrium price for the first day of trading after the initial public offering or relisting of shares in a normal trading session.
Price discovery for shares of newly listed companies or relisted shares happens through a call auction process, according to a circular issued by the market regulator in 2012.
The call auction process happens across multiple exchanges, leading to discrepancies in the discovered price or equilibrium price. If the deviation is significant, the price bands on individual exchanges can vary, presenting an incorrect picture to investors, SEBI said in a circular on Tuesday.
The regulator has asked exchanges to calculate a common equilibrium price if the difference between discovered prices on various exchanges (in percentage terms) is more than the applicable price band for the stock. The call auction process will continue on individual exchanges as usual.
This common equilibrium price will be a volume-weighted average of equilibrium prices on individual exchanges, as determined by the call auction process.
"The exchanges shall set the aforesaid common equilibrium price in their trading systems and apply uniform price bands based on the common equilibrium price, as applicable," SEBI said.
Only unexecuted pending orders from a call auction session within such a price band can be carried forward to the normal market segment, the regulator said.
These provisions will take effect 60 days from the issuance of the circular.