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Journalism of Courage
The Securities and Exchange Board of India (Sebi) has directed that trading of shares of companies going for a merger,demerger or a change in capital structure will have to be done in a price range for the first ten days of post-restructuring. This is being done to moderate sharp and destabilizing price movements in shares of companies and encourage better price discovery and to increase transparency in the securities market, it said.
Trading in the shares of such companies will have to be settled between buyers and seller without a clearing house for the first ten days,SEBI said. This means that intra-day trading cannot happen in these shares for the first ten days. In the case of a merger,demerger,amalgamation,capital reduction/consolidation,trading should take place in Trade-for-Trade segment for first 10 trading days with applicable price band while keeping the price band open on the first day of trading,the regulator said.
Trade-for-Trade settlement means that transactions will be settled between buyers and sellers without a clearing house. In this kind of settlement,intra-day trading is not possible as one has to take or deliver securities for every trade. Theres not much scope for manipulation in the TFT segment, said an analyst. However,SEBI said the circular will not apply to original scrips,on which derivatives products are available,or included in indices on which derivatives products are available. Scrips that are only traded in the cash segment will have to follow these rules.
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 will have to be in the trade -for-trade segment. In the case of securities that are being admitted to trading from another exchange by way of direct listing,MOU or securities admitted for trading under permitted category,and where suspension of trading is being revoked after more than one year,trading will take place in the TFT segment.
Analysts said the price range in trading of a concerned scrip 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.Trading in only fresh shares,that will emerge after the merger,demerger or capital restructuring,will have to follow these rules in case the scrips are eligible for futures trade and options.
