A New Platform to Promote Regulated Trading and Transparency in the Pre-Listing Phase
Introduction to SEBI’s ‘When-Listed’ Platform
The Securities and Exchange Board of India (SEBI) is actively working on launching a ‘when-listed’ platform to curb the unofficial and unregulated trading of shares in the grey market before their listing on stock exchanges. This platform aims to create a legal and structured mechanism for trading shares during the interim period between an Initial Public Offering (IPO) and the listing of shares on the stock exchanges.
SEBI Chairperson Madhabi Puri Buch announced this development during the 13th AIBI annual convention, emphasizing the importance of reducing grey market activities and providing a safer, regulated trading environment.
The Current IPO Listing Process and Grey Market Concerns
At present, IPOs in India follow a T+3 timeline (three working days from the closure of the IPO to the listing of shares on stock exchanges):
- T (Offer Closing Day): Investors submit bids for IPO shares.
- T+1 (Allotment Day): Shares are allotted to investors.
- T+3 (Listing Day): Shares become tradable on exchanges.
During this gap between allotment and listing, shares are often traded in the grey market – an unofficial and unregulated space where transactions occur based on supply and demand.
While investors use the grey market to assess the premium of IPO shares, SEBI identifies this practice as risky and unsuitable due to its lack of transparency and regulation.
Key Features of the ‘When-Listed’ Platform
- Structured Trading Opportunity
The ‘when-listed’ platform will allow investors to trade allotted shares in a regulated and transparent environment. This eliminates the need for engaging in the grey market. - Regulated Pre-Listing Trading
By providing an organized alternative, SEBI ensures that pre-IPO trading activity happens legally, safeguarding the interests of investors. - Investor Protection and Market Transparency
The platform aims to minimize risks associated with grey market trading, including price manipulation and lack of accountability. - Faster IPO Process
SEBI’s chairperson mentioned ongoing efforts to streamline IPO documentation through a standardized template, reducing processing time for IPOs. This demystification will simplify the process for merchant bankers and issuers, creating efficiencies for all stakeholders.
Benefits of the ‘When-Listed’ Platform
- Reduction in Grey Market Activity: The platform addresses the issue of unregulated trading by offering a legitimate alternative.
- Fair Pricing Mechanism: Investors gain access to a transparent system, ensuring fair valuation of shares before listing.
- Enhanced Investor Confidence: A regulated trading environment promotes trust and encourages more participation in the capital market.
- Streamlined IPO Process: The introduction of a standardized IPO template will expedite the preparation and review of IPO documents, saving time for issuers and SEBI alike.
Demystifying IPO Documentation
Madhabi Puri Buch highlighted SEBI’s efforts to simplify the IPO process by introducing a two-part IPO document:
- Standard Section: A template-based format to streamline common elements of the IPO document.
- Exceptional Section: A provision for reporting unique aspects of an IPO that deviate from the norm.
This innovation will ease the workload for merchant bankers and make IPOs more accessible for issuers while accelerating SEBI’s review process.
Conclusion
The launch of the ‘when-listed’ platform by SEBI is a significant step towards reducing grey market activity and enhancing the transparency of India’s financial markets. By providing a regulated trading option and streamlining the IPO process, SEBI aims to protect investors and ensure the capital market functions efficiently.
Disclaimer:
This article is for informational purposes only and should not be considered as financial or legal advice. For specific investment decisions, consult a professional advisor.
