India's markets regulator proposes changes to price discovery rules for IPO listing
- SEBI suggested a shift towards a more 'realistic' and market-linked base price for re-listed stocks
India’s markets regulator on Thursday proposed changes to the price discovery mechanism for shares that are making their trading debut, aiming to address concerns over suppressed pricing during pre-open trade.
The Securities and Exchange Board of India (SEBI) released a consultation paper on reforms to the pre-open call auction session, a one-hour window before regular trading to set opening prices.
SEBI said current rules, especially for re-listed stocks, can lead to artificially low starting prices and large-scale rejection of buy orders due to price band limits.
Among the proposed changes, SEBI suggested a shift towards a more “realistic” and market-linked base price for re-listed stocks, including using recent market prices or independent valuations.
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The regulator did not propose any change to the base price mechanism for initial public offerings, which will continue to use the issue price.
It also proposed that price discovery in the pre-open session should involve at least five distinct buyers and sellers to ensure broader participation.
The changes aim to improve price discovery and curb volatility on listing day.
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