NEWS – The Securities and Exchange Board of India (SEBI) has introduced a framework to shield stock prices from the impact of market rumours. This framework aims to maintain fair pricing for transactions such as takeovers, buybacks, and preferential issues.

HIGHLIGHTS

Unaffected Price Rule

• Definition: The “unaffected price” is the price before a particular rumour emerged and became public.
• Application: The rule applies if the listed entity confirms the rumour within 24 hours of a material price movement.

Weighted Average Price (WAP) Exclusion

• Calculation Period: The WAP variation will be excluded from the day of the material price movement until the next trading day after the rumour is confirmed.
• Objective: To exclude price disruption caused by market rumours during the acquisition price calculation.

Price Band Limit Adjustments

• If the price variation due to rumour confirmation hits the price band limit, subsequent trading days’ price variations will be included for adjustment until the price does not hit the band limit.

Implementation Details

• Commencement: The framework will take effect from June 1.
• Phase 1 (June 1): Applicable to the top 100 listed entities.
• Phase 2 (December 1): Applicable to the top 250 listed entities.

Unaffected Price Timeframe

• Determination Period: The “unaffected price” must be determined within 24 hours of any material price movement, excluding the rumour.
• Applicability Duration: Unaffected price applicable for either 60 days or 180 days after confirmation, depending on the transaction stage.

Benefits of the Framework

• Promotes Transparency: Faster responses from listed companies are encouraged.
• Investor Confidence: Enhances confidence among investors by reducing speculative activity.
• Level Playing Field: Ensures fair pricing for buybacks, mergers, acquisitions, and other transactions.