Sebi’s ‘when-listed’ platform

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.

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.