Trading of shares of companies going for a merger, demerger or a change in the capital structure will have to be done in a price range for the first ten days of post-restructuring, the Securities and Exchange Board of India said in a move aimed at curbing volatility in trading of these scrips.
In addition, trading in these shares will have to be settled between buyers and sellers for the first ten days, SEBI said. This means that intra-day trading cannot happen in these shares for the first ten days.
SEBI said in case of a merger, demerger, amalgamation, capital reduction/consolidation, scheme of arrangement, “trading shall take place in the Trade-for-Trade segment for first ten trading days with the applicable price band while keeping the price band open on the first day of trading.”
Trade-for-Trade settlement means that transactions will be settled between buyers and sellers. In this kind of settlement, intra-day trading is not possible, since one has to take or deliver securities for every trade.
Explaining the provisions, SMC Capitals Equity Head Jagannadham Thunuguntla said the price range in trading of a scrip concerned on the first day of listing post-merger, demerger or capital changes will be taken as the band for trading over the next ten days.
SEBI said the circular would not apply to “original scrips on which derivatives products are available, or included in indices on which derivatives products are available.”
Explaining this provision, Mr. Thunuguntla said trading in only fresh shares, which would emerge after the merger, demerger or capital restructuring, would have to follow these rules in case the scrips were eligible for trade under futures and options.
Scrips that were only traded in the cash segment would have to follow these rules, he said.
The market watchdog also directed that trading in scrips of all companies where at least half of the non-promoter holding is not in a digital form would have to be in the Trade-for-Trade segment.
SEBI said the exchanges shall ensure that before starting trading in scrips, the companies have complied with the disclosure requirements and the same is publicly disseminated on the website of exchanges to enable investors to take informed decision.
SEBI said the move was aimed at “moderating sharp and destabilising price movements in shares of companies to encourage better price discovery and to increase transparency in the securities market.”
