IPOs' mandatory grading: SEBI defers decision

Panel to study derivatives market

NEW DELHI: The Securities and Exchange Board of India (SEBI) on Saturday deferred a decision on mandatory grading for IPOs (initial public offerings), while deciding to set up a committee on the derivatives market and frame regulations for investment advisors.

However, the issue of allowing institutional investors to short sell securities, that is, to trade in securities without owning them, was not taken up at the SEBI's board meeting held here.

"The board decided to take a final call on (mandatory) grading of IPOs, after a credit rating agency makes its presentation to the SEBI's board,'' SEBI Chairman M. Damodaran told reporters after over an eight-hour meeting.

SEBI was slated to hold its next board meeting some time next month, he said.

The decision was taken after a rating agency requested SEBI to make a presentation on the experience gained in grading of IPOs.

At present, it is optional for companies to go in for grading of their IPOs. ICRA, CRISIL and CARE are in the business of grading IPOs.

The Primary Market Advisory Committee of SEBI had recommended mandatory grading of IPOs on a trial basis for six months.

New products

Mr. Damodaran said the meeting decided to set up a committee to study various aspects of the derivatives market and suggest changes, if any, and identify new products to be introduced in this segment.

When asked whether a decision on delivery-based settlement in the options market would be taken after the committee submits its report, he said nothing stopped SEBI from taking decisions at any time.

The over six-year old derivatives market in India has come a long way and overtaken the cash segment on the Bombay Stock Exchange and the National Stock Exchange.

The market regulator also decided to frame regulations on investment advisors giving advises to investors through various channels of communication, Mr. Damodaran said.

When asked whether the regulations would specifically be for the media, he said there were many means of communications besides the media.

The purpose of proposed regulations would not be to help in determining the price mechanism, but to help investors take informed decisions, he said.

The meeting also discussed the progress made in respect of demutualisation and corporatisation of stock exchanges and the progress made in implementing recommendations of the R. H. Patil Committee on corporate debt markets, he said.