Processing .....please wait.. 
The article has been forwarded.... 
SEBI for 25 percent price band on listing day
By siliconindia
|
Saturday, 19 January 2008, 00:34 IST
Mumbai: With a view to enable a "steady and sustained price discovery over a period of time", stock market regulator Securities and Exchange Board of India (SEBI) has proposed a 25 percent first day price band for IPOs up to Rs 250 crore ($62.5 million). Such a price band will put off several punters and leveraged investors who borrow money to pocket the listing premium by selling the shares soon after trading begins.
Responses to the move were of mixed nature. Prime Database MD Prithvi Haldea asked, "why single out the smaller players?" According to him, "the price discovery mechanism in IPOs is the first thing to be addressed."
Stock exchanges do not impose price bands on the day of listing of IPOs at present. The price fixed by the company is left open to price discovery. And there is a regular price band of 20 percent after the day of listing. This would not apply to stocks that get re-listed.
In the case of IPO issue sizes that are greater than Rs 500 crore ($125 million), price bands are not imposed even after the day of listing, if such scrips are available for trading on the derivative segment.
In April 2007, SEBI had banned seven brokerages from debut trading in newly listed shares for their alleged role in huge price movements recorded in stocks like Cambridge Technology, Mindtree and Pyramid Saimira Theatre on their first day of trading.
In a note on Thursday, SEBI said it has been noticed that there are significant price and volume spikes volatility on the day of listing of IPOs. This was particularly true of IPOs, which were below Rs 250 crore ($62.5 million).
"While it is appreciated that demand-and-supply mechanics should freely determine the market price, large-scale price or volume fluctuations on the first day of trading seem to warrant a systemic response to contain such sharp movements. So, there seems to be a need to consider a price band even on the day of listing of IPOs. This would not only assist in a more orderly price discovery process over a period of time but also have a salutary impact on potential abnormal price movements on the day of listing," said a SEBI release.