SEBI's Proposal for 'When Listed' Trading, Could be A New Chapter for IPO Investors

Madhabi Puri Buch, the Chairman of SEBI, has initiated a landmark proposal in the backdrop of the Capital Market Regulation Implementing Bill relating to the IPO trading landscape. 'When Listed' would allow a trading-wise immediate opening in the case of the closure of the IPO on the third day. It will no longer require the traditional three-day duration for the shares to be listed on the exchange. Be it the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE), it will list its respective shares for trading.

The proposal suggests introducing a ‘when-listed’ trading period between an IPO’s closure and its listing on exchanges, replacing the current informal ‘curb trading’ phase. This aims to regulate grey market activity, enhance transparency, and build investor trust by allowing trades in a structured, transparent environment.

The Proposal's Framework: SEBI is considering a move whereby potential investors, if they so desire, can trade in the shares of pre IPO companies in the pre-listing equity market. Once the IPO closes, immediate trading can take off soon afterwards, presenting a first-time opportunity for the market to vertically assess the new security even before it is finally in the market.

Operational Mechanism: Under this proposed model, trading would begin as soon as the IPO process concludes, providing an early window for price discovery and market sentiment assessment. This move is expected to bring underground or grey market trading into an official framework, thereby promoting transparency and fairness in trading practices.

Significance and Benefits: The implementation of the 'When Listed' system would significantly reduce waiting times for investors, allowing market order depth with new shares. There was a potentially more efficient capital market angularity to enable preliminary appreciation of market response, thus being more realistic about the IPO-listed purpose.

Potential Market Impact: Adopting this would bring vitality and drive into the stock market in India by enhancing the liquidity and involvement of investors in public issues. It is a step ahead in creating very dynamic and inclusive markets—inviting investors to meet new IPO stocks as soon as they come into the universe.

The SEBI initiative emphasizes commitment toward an innovative market, intending to redefine and refine how IPO trade management occurs and is practised within India. However, with every sweeping reform such as this from regulatory authorities, careful evaluation and planning become mandatory to address potential risks and ensure system effectiveness.