SEBI Mulls Introduction Of Platform For Trading Unlisted Shares

Market regulator SEBI is considering the creation of a new platform to enable the trading of unlisted shares. The market regulator plans to provide investors with a way of trading securities before they make their D-street debut officially.

SEBI chairperson Madhabi Puri Buch said in an event on January 21 that a lot of ‘curb’ trading takes place between the allotment and the listing of a share during the Initial Public Offer process.

Typically the share allotment and the listing of the share on the exchanges happens in a three-day window. Buch emphasised that since such instances of trading of unlisted securities already take place unofficially, investors should be given a chance to do the same in a properly regulated space.

"Between the three days when the shares are allotted to the time the shares start trading, there is a lot of curb trading," Buch said. If investors want to do this, why not give them the same opportunity in a properly regulated space, Buch said.

"The shares may not have started trading on the markets, but the person might have been allotted those shares, so he has the entitlement for those shares," Buch added.

IPO investors can benefit from the introduction of such a platform as it will allow them to trade the shares before the listing of the shares. Currently, IPO investors receive shares in their Demat accounts after the share allotment status of a public issue is finalised, however the share is ‘frozen’ and cannot be sold or bought by investors.

However unofficial trading of unlisted shares is rampant and takes place in a ‘grey market’. The unregulated trading of such shares is done on the basis of the Grey Market Premium (GMP) which is considered an indicator of potential listing gains. The premium is calculated as the sum total of the upper end of the price band and the additional premium which is determined on the basis of demand trends in the grey market.

The news regarding the introduction of the new trading platform comes at a time when the primary market is witnessing strong investor interest. The Indian primary market had a stellar run in 2024 as 268 companies successfully raised Rs 1.67 lakh crore through public issues.