Exchanges to set common equilibrium price for listing day post IPO: SEBI

The Securities and Exchange Board of India (SEBI) has asked stock exchanges to set a “common equilibrium price” for stocks on the first day of the listing post the IPO, with a view to remove any ambiguity over price discovery.

Currently, the price discovery for shares happens through a call auction process.

The regulator said the call auction session would continue to be conducted separately on individual

exchanges and orders would be matched by respective exchanges after computation of the equilibrium price.

If the difference in the equilibrium price between exchanges in percentage terms is more than the applicable price band for the stock, a “common equilibrium price” would be computed by exchanges, SEBI said.

The common equilibrium price shall be volume weighted average of equilibrium prices on individual exchanges as determined by the call auction.

Call auction sessions are conducted on multiple stock exchanges, but the discovered price could be different on each exchange.

If the difference in these discovered prices is significant, there could be a situation wherein price bands on individual exchanges are far apart from each other, giving an incorrect picture of the price band to investors, SEBI said.

As a result, the regulator has proposed a common discovery or equilibrium price for debutant stocks.

“The exchanges shall set the aforesaid CEP (common equilibrium price) in their trading systems and apply uniform price bands based on the CEP,” the regulator said.

The applicable rules for equilibrium price will come into effect after 60 days from today, it said.

SEBI has directed bourses to take necessary steps to put in place systems for implementation the same.

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