Trade controls in Normal Trading Session for Initial Public Offering (IPO) and other category of scrips
Summary
SEBI mandates specific trade controls and price bands for Initial Public Offerings (IPOs) and re-listed scrips on their first day of trading to mitigate volatility. The applicable price band percentage depends on the issue size, being 5% for issues up to INR 250 crore and 20% for larger issues. Stock Exchanges are required to implement these systems, amend bye-laws, and report implementation status to SEBI.
Text
SEBI vide circular no. SMD/SED/RCG/271/96 dated January 19, 1996, inter-alia, prescribed no price bands for scrips on the first day of trading pursuant to IPO.
In light of high volatility and price movement observed on first day of trading, it has been decided to put in place a framework of trade controls for IPO and Re-listed scrips applicable to the normal trading session.
The normal trading session for IPO and Re-listed scrips on their first day of trading shall commence only subsequent to conclusion of the Call Auction session for such scrip on BSE and NSE.
For issue size up to ` 250 cr, in case equilibrium price is discovered in the Call Auction, the price band in the normal trading session shall be 5% of the equilibrium price.
For issue size up to ` 250 cr, in case equilibrium price is not discovered in the Call Auction, the price band in the normal trading session shall be 5% of the issue price.
On Stock exchanges, not eligible to offer Call Auction, if equilibrium price is discovered in the Call Auction at BSE/NSE, the price band in the normal trading session shall be 5% discovered equilibrium price.
On Stock exchanges, not eligible to offer Call Auction, in case equilibrium price is not discovered, the price in the normal trading session band shall be 5% of the issue price.
Additionally, the trading shall take place in TFT segment for first 10 days from commencement of trading.
For issue size greater than ` 250 cr, in case equilibrium price is discovered in the Call Auction, the price band in the normal trading session shall be 20% of the equilibrium price.
For issue size greater than ` 250 cr, in case equilibrium price is not discovered in the Call Auction, the price band in the normal trading session shall be 20% of the issue price.
On Stock exchanges, not eligible to offer Call Auction, if equilibrium price is discovered in the Call Auction at BSE/NSE, the price band in the normal trading session shall be 20% discovered equilibrium price.
On Stock exchanges, not eligible to offer Call Auction, in case equilibrium price is not discovered, the price band in the normal trading session shall be 20% of the issue price.
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Source: SecMarx — Trade controls in Normal Trading Session for Initial Public Offering (IPO) and other category of scrips. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.