To check irregular movement in stock prices, Sebi on Tuesday came out with 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), according to a 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.
If the difference in these discovered prices is significant, there could be a situation wherein price bands on individual exchanges are far apart from each other, giving an incorrect picture of price band to investors.
The new framework would come into force after 60 days, the Securities and Exchange Board of India (Sebi) said.
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