Pro rata mechanism led to unnatural price discovery with inflated oversubscription of IPOs: Sebi chief

Sebi chief Madhabi Puri Buch on Friday said the level of oversubscription in IPOs was getting inflated because of the pro rata mechanism, and hence it had to be stopped.

Responding to a question on why there was a pause in pro rata formulation, Buch said the process was leading to a certain unnatural price discovery.

“If an investor wants 100 shares, there is an impression that he or she had to apply for 2,000 shares. As a result of this, the price discovery mechanism was being corrupted,” Buch said.

The regulator had earlier said it would address the issue of exorbitant valuation of initial public offerings seen in the recent past.

“In the wake of high pricing of IPOs, retail investors will be better off investing after the dust settles down post debut in secondary market,” Buch had said.
Speaking at CII Global Economic Policy Forum, the regulator is ready to introduce same-day settlement of trades on the stock exchanges by March 2024.

“We are ready to introduce T+0 (T plus zero) settlement trade by the end of the current fiscal,” Buch said.

Sebi, which has already reduced the settlement timelines to as short as one day after the transaction, is now looking to shorten the same further.
Earlier this year, the country’s stock markets transitioned from T+2 to T+1 settlement, settling trades on the following business day.

(Subscribe to ETMarkets WhatsApp channel)

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Secular Times is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – seculartimes.com. The content will be deleted within 24 hours.

Leave a Comment