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  • SEBI Plans Regulated Framework for Trading Shares Before IPO Listing

SEBI Plans Regulated Framework for Trading Shares Before IPO Listing

The Securities and Exchange Board of India (SEBI) is working on introducing a new system that allows trading in shares of companies that are in the process of listing.

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SEBI Plans Regulated Framework for Trading Shares Before IPO Listing

SEBI is working on introducing a new system that allows trading in shares of companies that are in the process of listing.


The Securities and Exchange Board of India (SEBI) is working on introducing a new system that allows trading in shares of companies that are in the process of listing. This concept, referred to as “when listed,” aims to regulate and formalize the trading of shares after IPO bidding has closed but before the official listing, a period currently dominated by the unofficial grey market.

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Grey Market and the Impact of GMP 

Presently, shares of to-be-listed companies are often traded in the unofficial grey market. A key element of this market is the Grey Market Premium (GMP), which can significantly influence the listing price of stocks. SEBI’s move to formalize this process seeks to neutralize the impact of the grey market and provide investors with a regulated platform to trade such shares.

Speaking at the annual conference of the Association of Investment Bankers of India (AIBI), SEBI chairperson Madhabi Puri Buch expressed the regulator’s concerns about the existing grey market. “We are against the ‘black market’ for to-be-listed stocks that exists and operates after shares in the IPO are allotted but before listing,” she said.

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SEBI’s Investor Rights and Regulated Trading

Highlighting investor rights, Buch stated, “An IPO investor who has got allotment in the offer, the investor’s entitlement to those shares is crystallized and should have the right to sell those shares.” Currently, trading in yet-to-be-listed stocks in the grey market can continue for up to 15 days, or until the official listing day. SEBI’s proposed framework will provide a legal and transparent way for such trades to take place.

SEBI’s “when listed” concept draws inspiration from the “when issued” segment in the government bond market. In this system, government bonds are traded after their notification but before they are sold in the market. This trading window typically lasts 3-4 days. Similarly, SEBI plans to introduce a regulated trading window for IPO shares after allotment and before listing.

Record IPOs in 2024 and Future Potential

The need for such a system is underscored by the record-breaking year 2024, during which over 91 large companies raised a total of ₹1.6 lakh crore through IPOs, according to data from Prime Database.

Looking ahead, Mahavir Lunawat, president of AIBI, predicted that around 1,000 companies could pursue IPOs in the next two years. SEBI’s chairperson assured the audience that the regulator is prepared to handle such volumes, aided by advanced AI tools that streamline the processing of offer documents.

SEBI To Simplify IPO Processes

To further enhance efficiency, SEBI is developing a standardized template for IPO submissions. This new system will feature a fill-in-the-blanks approach for standard parameters, along with space for non-standard, company-specific disclosures. This template aims to make the IPO process simpler for companies and merchant bankers while maintaining the necessary level of detail.

SEBI’s Step Toward Transparency

SEBI’s proposed “when listed” framework reflects its commitment to fostering transparency and safeguarding investor interests. By formalizing the trading of to-be-listed shares, the regulator aims to eliminate the influence of unregulated markets and ensure a fair, organized process for all stakeholders involved in IPOs.

With IPO activities on the rise and SEBI’s proactive measures to enhance the system, the Indian capital market is poised for greater efficiency and investor confidence in the years to come.

ALSO READ | Why Did The Stock Market Crash Today? 5 Major Factors Affecting The Indian Stock Market


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