Mumbai, Feb 13 (PTI) The country''s premier bourseBombay Stock Exchange (BSE) is planning to introduce pre-opentrade on IPO stocks on the listing day, which is currentlyallowed only on index stocks along with 20 other large capcounters.
"We are keen on allowing the IPO stocks to have a pre-open session on their debut day. We are talking to the marketwatchdog Sebi on this," BSE Deputy Chief Executive AshishkumarChauhan told PTI.
As to how this would assist the debutant company,Chauhan said it will help avoid wild price fluctuations on thelisting day as it does on other stocks.
Explaining the mechanism he said, "instead of the 50stocks that are allowed to have pre-open now, when there is alisting, the debutant scrip will also be part of the pre-opentrade on that day."
On October 18 last year, both the BSE and NationalStock Exchange (NSE) had started a 15-minute special pre-opensession to help reduce extreme price volatility, typicallyvisible in the first few minutes of trade, besides betterintegrating the domestic markets with international markets.
Normally, market sees wild price fluctuations whenthere is any major event or announcement by a company like anM&A, open offer, delisting, debt-restructuring, credit-ratingdowngrades or upgrade and rumours regarding any such event.
The market watchdog Securities and Exchange Board hadallowed introduction of pre-open session call auction on thebourses last July, from 9 to 9.15 am. (more) PTI BENRSY
In a call auction, participants indicate their willingness to buy or sell stocks by placing an order for anumber of units at the prevailing price before the tradingbegins. This mechanism is known as the pre-open session callauction, and is prevalent in all the leading global bourses.
According to market experts, the pre-open trade willhelp both retail as well as institutional investors byreducing price volatility due to multiple matching of ordersat a single price, better price discovery and also dilutemarket impact. Another advantage is a fairer market,especially for small, non-professional investors because alltrades get executed at the same price.
According to the BSE officials, a uniform price bandof 20 per cent will be applicable to all eligible securitiesduring the pre-open session.
In the first 15 minutes, investors can place ordersfor eight minutes on the basis of which the exchanges willdetermine the rates at which trading will happen.
The facility is now applicable only on the Sensex andNifty scrips and 20 large cap stocks more in the case of theSensex to align with the NSE.