NOW SEBI DECIDES TRADING CRITERIA OF ILLIQUID
STOCK BASED ON PROFITABILITY, PLEDGED SHARES, MARKET CAPITALISATION, AND
DIVIDEND:
The Securities and Exchange Board of India has
loosened the trading criteria on illiquid scrips, based on profitability and market
capitalisation.
Call auctions will not apply to shares ‘where a company is profitable in at least two of the past three years, and not more than 20 per cent of promoters’ shareholding is pledged in the latest quarter and the book value is three times or more than the face value’.The new rules also exclude companies with a market capitalisation of at least Rs 10 crore or which have paid a dividend in at least two of the past three years.
The regulator had earlier decided to apply the periodic call auction rules to all stocks with average trading volume of less than 10,000 and quarterly average daily number of trades of less than 50. A stock can now exit the periodic call auction after a quarter, as opposed to two quarters earlier, so long as it is not classified illiquid.The number of trading sessions for such stocks has been left to the exchanges, so long as they have at least two sessions in a trading day, with one uniform closing session across exchanges.Sebi has also said orders need not be re-entered at the end of every session and unmatched orders can be carried forward to the next one.
OUR VIEW:
THIS CHANGE CAME IN, AS SAID BY THE AUTHORITIES, AFTER THE SMAC OR SECONDARY MARKET ADVISORY COMMITTEE OF SEBI HAD RECEIVED SEVERAL REPRESENTATIONS REGARDING THE DIFFICULTIES OF THE CALL AUCTION METHOD. THE FACT IS THAT THE CALL AUCTION METHOD IS COMPLEX, AND UNTIMELY. IT IS NOT IN ANYWAY DOING GOOD TO RETAIL INVESTORS. SEBI NEEDS TO UNDERSTAND THAT TO DO GOOD TO RETAIL INVESTORS, IT FIRST NEEDS TO HAVE THEM! WE HAVE TIME TO TIME REACTED TO SUCH STEPS OF THE MARKET REGULATOR BY SUGGESTING THEY SHOULD BE BROUGHT IN WHEN THE MARKETS ARE GOOD AND RETAIL PARTICIPATION IS ROBUST. THEN YOU TRY TO BRING SUCH MEASURES WHICH IMPEDES THE UNSCRUPLOUS OPERATORS AND MANIPULATORS FROM HARMING THE RETAIL INVESTORS. BUT THEY SELDOM DO THAT. NOW IS NOT THE TIME. NOW THE FOCUS AND THRUST OF SEBI SHOULD BE TO THINK OF IDEAS WHICH CAN INCREASE THE PARTICIPATION OF RETAIL INVESTORS. THERE ARE MANY WAYS THEY CAN DO SO TO ATTRACT THEM.
Call auctions will not apply to shares ‘where a company is profitable in at least two of the past three years, and not more than 20 per cent of promoters’ shareholding is pledged in the latest quarter and the book value is three times or more than the face value’.The new rules also exclude companies with a market capitalisation of at least Rs 10 crore or which have paid a dividend in at least two of the past three years.
The regulator had earlier decided to apply the periodic call auction rules to all stocks with average trading volume of less than 10,000 and quarterly average daily number of trades of less than 50. A stock can now exit the periodic call auction after a quarter, as opposed to two quarters earlier, so long as it is not classified illiquid.The number of trading sessions for such stocks has been left to the exchanges, so long as they have at least two sessions in a trading day, with one uniform closing session across exchanges.Sebi has also said orders need not be re-entered at the end of every session and unmatched orders can be carried forward to the next one.
OUR VIEW:
THIS CHANGE CAME IN, AS SAID BY THE AUTHORITIES, AFTER THE SMAC OR SECONDARY MARKET ADVISORY COMMITTEE OF SEBI HAD RECEIVED SEVERAL REPRESENTATIONS REGARDING THE DIFFICULTIES OF THE CALL AUCTION METHOD. THE FACT IS THAT THE CALL AUCTION METHOD IS COMPLEX, AND UNTIMELY. IT IS NOT IN ANYWAY DOING GOOD TO RETAIL INVESTORS. SEBI NEEDS TO UNDERSTAND THAT TO DO GOOD TO RETAIL INVESTORS, IT FIRST NEEDS TO HAVE THEM! WE HAVE TIME TO TIME REACTED TO SUCH STEPS OF THE MARKET REGULATOR BY SUGGESTING THEY SHOULD BE BROUGHT IN WHEN THE MARKETS ARE GOOD AND RETAIL PARTICIPATION IS ROBUST. THEN YOU TRY TO BRING SUCH MEASURES WHICH IMPEDES THE UNSCRUPLOUS OPERATORS AND MANIPULATORS FROM HARMING THE RETAIL INVESTORS. BUT THEY SELDOM DO THAT. NOW IS NOT THE TIME. NOW THE FOCUS AND THRUST OF SEBI SHOULD BE TO THINK OF IDEAS WHICH CAN INCREASE THE PARTICIPATION OF RETAIL INVESTORS. THERE ARE MANY WAYS THEY CAN DO SO TO ATTRACT THEM.
