SEBI asks exchanges to arrive at equilibrium price for IPOs on listing
The SEBI recently issued circular asking the exchanges to compute an equilibrium price for the newly-listed stocks at the end of the day’s trading session on the first day of listing. The ongoing call auction system, where all the bids are collected first and then matched, will continue separately on the exchanges but the final closing price on the NSE and the BSE will be the same based on the equilibrium calculation. The Call Auction sessions are conducted on multiple stock exchanges, the discovered price / equilibrium price pursuant to such Call Auction sessions could be different on each exchange. If the difference in these discovered prices is significant, there could be a situation wherein price bands on individual exchanges are far apart from each other, giving an incorrect picture of price band to investors.
As per SEBI, if the difference in the equilibrium price between exchanges in percentage terms (i.e. absolute difference or a minimum of equilibrium prices, expressed as %) is more than the applicable price band for the scrip, a common equilibrium price (CEP) will be computed by exchanges. The CEP will be a volume-weighted average of equilibrium prices on individual exchanges as determined by the call auction. The exchanges will set the aforesaid CEP in their trading systems and apply uniform price bands based on the CEP.
