SEBI will soon allow trading of stocks before market listing
What's the story
The Securities and Exchange Board of India (SEBI) is considering creating a platform to allow stock allottees to trade their shares, before they are officially listed on stock exchanges.
SEBI Chairperson Madhabi Puri Buch revealed the initiative at an event today.
The proposed platform would govern the gap between the time shares are credited into a demat account and their official listing on exchanges.
Curb trading
Buch highlights curb trading during pre-listing period
Buch emphasized the widespread curb trading in the time between share allotment and their market debut.
She said, "Between the three days when the shares are allotted to the time the shares start trading, there is a lot of curb trading."
The SEBI Chairperson proposed that if investors are already doing this, they should be given a regulated environment to do so.
Regulation
Current regulations freeze shares until official listing
Under existing rules, shares remain frozen in the demat account until their official listing.
This rule is meant to stop the trading of unlisted shares on unregulated platforms.
However, Buch said that even if the shares haven't started trading on markets, a person who has been allotted those stocks has entitlement over them.
SEBI's proposed platform seeks to solve this problem and offer a regulated environment for pre-listing share trading.
Gray market
SEBI's move targets unregulated gray market trading
The move by SEBI assumes added importance considering the rampant trading of unlisted shares in the unregulated gray market.
More often than not, the gray market premium is considered a barometer of possible listing gains.
This comes at a time when the primary market is witnessing record activity in terms of both the number of initial public offerings (IPOs) and cumulative fund raising.