Market regulator Securities and Exchange Board of India (SEBI) has made provision for additional monitoring to prevent misuse of pre-open call auction sessions for initial public offerings (IPOs). SEBI has said in its new circular that the new session running from 9 am to 60 minutes will be structured with specific intervals for order entry, order modification, order cancellation, order matching and trade confirmation. According to the news of Financial Express, SEBI’s new rules regarding this will come into effect after 90 days.
what will happen in the new rule
According to the news, the pre-auction session will be for a period of 60 minutes from 9 am to 10 pm. Out of which 45 minutes will be for order entry, order modification and order cancellation, 10 minutes for order matching and trade confirmation and the remaining 5 minutes will be a buffer period to facilitate the transition from the pre-open session to the normal trading session. The circular also states that the changed rules will also allow system-driven random closure during the last 10 minutes of order entry, which can happen anytime between the 35th and 45th minute of the order entry window.
Will be able to generate stock exchange alerts
Sebi said the initiative has been taken in response to the cancellation of orders placed at high prices and in large quantities just before the close of the call auction session, thereby creating false demand and supply and possibly manipulating the price to the detriment of the common investors.
According to the report, apart from the monitoring mechanism, the stock exchanges will generate alerts based on parameters like significant change in prices from previously placed orders, cancelled volume/value exceeding 5 per cent of the total cancelled volume/value in the market during the pre-open session or exceeding 50 per cent of the volume/value placed by the client.
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