Sebi’s ‘when-listed’ platform |ForumIAS

News: The Securities and Exchange Board of India (SEBI) is planning to launch a “when-listed” platform.

About “when-listed” platform

This platform will allow trading of a company’s shares between the allotment of shares after an IPO and their official listing on stock exchanges.
The platform aims to reduce ‘grey market activity’ in companies’ stocks.

Grey Market

The grey market is an unofficial, unregulated market.
It involves trading securities or goods before they are officially listed or released.
In the context of stocks, it refers to trading shares before they are publicly listed on a stock exchange.
Trades in the grey market are based on supply and demand, with no actual delivery of shares.
Investors buy or sell shares based on speculation.
The grey market can influence market sentiment, leading to volatility or distorted perceptions of a stock’s value.

Current timeline for listing of shares:

After the IPO bidding process closes, shares must be listed on stock exchanges within T+3 (trading plus three working days).
The allotment of shares takes place on T+1 day, one day after the bidding ends.
The gap between the allotment and listing day leads to grey market trading by investors.
SEBI aims to reduce this pre-listing grey market trading activity.

Mechanics of Grey Market Trading:

Grey market activity begins when a company announces an IPO.
Brokers set a price band and establish a premium above it.
Investors place bids to buy or sell shares at these inflated prices.
The opening price on the listing day determines the settlement of trades.
Investors face the risk of the stock opening lower than expected, which could lead to potential losses.

Benefits of the When-Listed Platform:

The platform allows investors to sell their allotments immediately after confirmation.
It aims to eliminate the need for grey market trading by offering a regulated environment for pre-listing transactions.
According to Sebi, the platform will enhance market integrity.
It aims to protect retail investors from potential losses due to grey market fluctuations.