The Securities and Exchange Board of India (SEBI), announced on August 08, 2023, to cut the post-Initial Public Offering (IPO) share listing period from the current six days to three days. This adjustment, effective September 1, 2023, will be optional for all public offerings initiated on or after that date and will become obligatory for all subsequent issues starting December 1, 2023.
This alteration is projected to have favourable outcomes for both issuers and investors. Issuers will experience quicker access to their funds, while investors will gain an earlier entry into share trading. Furthermore, it is anticipated to enhance the tradability of IPO shares.
The choice to reduce the listing period comes after extensive discussions with stakeholders in the market. SEBI has stated that this step aligns with its ongoing endeavours to enhance the efficiency and investor-friendliness of the IPO procedure.
SEBI in its circular said, “It has been decided to reduce the time taken for the listing of specified securities after the closure of a public issue to three working days (T+3 days) as against the present requirement of six working days (T+6 days). ‘T’ being issue closing date.”
The regulatory body stated that the calculation of compensation for investors due to the postponement in the release of ASBA application funds will begin on the third day after the trading day (T+3).
Listed below are several notable advantages of the updated listing schedule:
- Enhanced fund reception: Issuers will experience expedited access to their funds, facilitating the achievement of their business goals.
- Prompt share trading: Investors will have the advantage of an earlier commencement of share trading, affording them the opportunity to engage in the IPO and realize returns on their investments.
- Augmented share liquidity: The anticipation is for an increased liquidity of IPO shares, as a larger pool of investors gains the ability to participate in share trading.
The decision to truncate the listing timeline represents a favourable step forward, set to bring advantages to both issuers and investors.
SEBI to verify PANs of demat and bank accounts for IPO applications
The SEBI has decreed that the Registrar to an Issue (RTO) will be responsible for third-party verification of PANs stored in the applicant's demat account and bank account for IPOs. This measure is aimed at thwarting illicit endeavours like money laundering and identity fraud.
Under the revised regulations, the RTO will cross-check the PANs listed in both the applicants’ Demat and bank accounts. In case of any discrepancies, the application will be deemed invalid and ineligible for share allotment.
This initiative follows the SEBI board's endorsement of a proposal in June. The updated regulations are set to be enforceable from September 1, 2023.
SEBI’s action is commendable as it safeguards investors against fraudulent practices, adding transparency and efficiency to the IPO procedure. Some of the primary advantages of these new regulations include:
- Mitigating the risk of fraudulent activities like money laundering and identity theft
- Enhancing transparency and efficiency in the IPO process
- Safeguarding investors from unscrupulous individuals
SEBI working on instant stock market transaction settlement
Madhabi Puri Buch, Chairperson, SEBI, has revealed the regulator's ongoing efforts toward achieving real-time transaction settlement within the stock markets. She highlighted that India has taken a pioneering leap by transitioning to a T+1 settlement cycle for all shares, marking a groundbreaking advancement.
The T+1 settlement refers to the practice of finalizing share transactions one day following the trade date, a departure from the previous T+2 settlement system, where transactions were settled two days after the trade date.
The shift to T+1 settlement stands as a significant milestone in the Indian stock market, enhancing its efficiency and competitive edge, while concurrently diminishing settlement risks for investors.
SEBI's current pursuit involves the implementation of instant settlement, envisioning a scenario where share transactions are settled on the very day of the trade. This stride would signify an even greater enhancement for the Indian stock market, intensifying its efficiency and competitiveness.
Buch emphasized SEBI's collaboration with various stakeholders to manifest instant settlement, acknowledging the intricacies involved yet reiterating the regulator's unwavering dedication to its realization.
An instant settlement would bestow substantial benefits upon investors. By diminishing settlement risks, it would facilitate smoother stock trading experiences. Additionally, it would elevate the Indian stock market's competitiveness on a global scale.
SEBI deserves commendation for its relentless endeavours in establishing an instant settlement. This monumental leap forward underscores the regulator's commitment to the growth and long-term advantages of the Indian stock market for all stakeholders involved.
As of January 27, the Indian stock market completed its transition to a more condensed trading cycle, adopting a T+1 settlement model, a pioneering move that positions the nation at the forefront globally. Preceding this shift, the domestic equity market adhered to a T+2 settlement cycle. With the implementation of the T+1 trading settlement framework from January 27 onwards, investors now have the capability to acquire shares in their Demat accounts and subsequently execute sales on the succeeding day.