Analysis and Insights into the world of IPOs and investing in India

Tuesday, January 24, 2012

SEBI introduces call auction session to curb IPO listing volatility

The market watchdog SEBI has said that normal trading upon listing of an IPO can now take place only after a call auction session. This is primarily a move to check volatile price movements on the first day of trading in newly listed and re-listed stocks

SEBI has been looking for a mechanism to curb the volatility on the listing day particularly in the light of many recent listings whereby the some of stocks used to run up by exhorbitant and often unjustified quantum such as 50-60% on listing day.

As per the new rules mandated by SEBI, all IPO stocks and the companies which are relisting again will have to go through a pre-open call auction for 45 minutes after which there would be a settlement of trades. Only after that will the opening trade begin for the IPO listings. The trading would now commence at 10:00 am instead of usual 9:15 am timings
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