The Securities and Exchange Board of India (Sebi) has announced new guidelines for the pre-open call auction session used for initial public offerings (IPOs). The session will span 60 minutes starting at 9 am, divided into specific time slots:
- Order Entry, Modification, and Cancellation: 45 minutes
- Order Matching and Trade Confirmation: 10 minutes
- Buffer Period: 5 minutes for transition to normal trading
Random Closure Mechanism
During the last ten minutes of the order entry phase (between the 35th and 45th minute), the session will close randomly, facilitated by automated systems to determine the opening price.
Measures to Prevent Manipulation
Surveillance Mechanisms
Sebi has directed stock exchanges to implement robust surveillance mechanisms to prevent manipulation during IPO pre-open sessions. This includes monitoring and analyzing order activities to ensure fair market practices.
Alerts and Reporting
Stock exchanges will generate alerts based on specific parameters such as significant price modifications and excessive order cancellations by a client. Daily reports on these alerts will be submitted to Sebi, and explanations may be sought from clients when necessary.
Transparency Enhancements
Real-Time Disclosure
Details of cancelled orders will be transparently displayed on stock exchange websites and trading terminals in real-time. This initiative aims to provide investors with timely information for making informed decisions about stock pricing.
Implementation Timeline
These regulations will come into effect 90 days from the issuance of Sebi’s circular, aiming to enhance transparency and fairness in IPO pre-open sessions.
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