SEBI Directs Stock Exchanges to set a Common Equilibrium Price for Share Trading on IPO Listing Date

Circular no. SEBI/HO/MRD-TPD1/CIR/P/2023/55; dated: 11.04.2023

Earlier, SEBI vide circular no. CIR/MRD/DP/02/2012 dated January 20, 2012, prescribed parameters regarding price discovery through Call Auctions and applicable price band for the first day of trading pursuant to IPO or recommencement of trading for re-listed securities during normal trading sessions.

Now, SEBI has issued a new framework for fixing the price band for trading in the share market on the first day of listing after an IPO. The objective of this framework is to simplify the process of determining the price band on the secondary market.

As per the new framework, the following guidelines have been established for trading on the first day pursuant to an IPO or re-listing:

(a) Call Auction session would continue to be conducted separately on individual exchanges and orders will be matched by respective exchanges after computation of equilibrium price.

(b) If the percentage difference in equilibrium price between exchanges is greater than the applicable price band for the security, exchanges will calculate a Common Equilibrium Price (CEP). The CEP shall be the volume-weighted average of equilibrium prices on individual exchanges, as determined by the Call Auction.

(c) The exchanges shall set the CEP in their trading systems and apply uniform price bands based on the CEP, as applicable.

(d) Only unexecuted pending orders from Call Auction session within the aforesaid price band shall be carried forward to the normal market segment.

The provisions of this circular shall come into effect from 10-06-2023.

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