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Sebi tightens norms for IPO price discovery to curb manipulation

Published on June 20, 2024
Current Context: The Securities and Exchange Board of India (SEBI), the capital market regulator in India, has implemented stricter rules for determining the opening price of stocks following an initial public offering (IPO).
Sebi tightens norms for IPO price discovery to curb manipulation
  • This aims to prevent manipulation during the price discovery process.
  • Here's a breakdown of what SEBI has done:
    • Increased Scrutiny in the Pre-Open Call Auction: This is a one-hour session before the stock starts trading where investors place bids. SEBI has tightened surveillance to identify and potentially penalize suspicious activity.
    • Focus on Order Matching: The first 45 minutes of the pre-open session allows for placing, modifying, or canceling orders. SEBI aims to ensure these orders are genuine reflections of investor interest.
    • Shorter Order Matching Window: The following 10 minutes are dedicated to matching these buy and sell orders to determine a fair equilibrium price for the stock.
    • Buffer Period: The remaining five minutes act as a buffer to smoothly transition from the pre-open session to regular trading.

Question:

1 As per the new norms of SEBI for IPOs, During the pre-open call auction, investors can place bids for how long before trading begins,?

  • A) 30 minutes
  • B) 45 minutes
  • C) 15 minutes
  • D) 1 hour
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