Consultation Paper on Framework for Price Discovery of Shares of listed Investment Companies & listed Investment Holding Companies

The Securities and Exchange Board of India (SEBI) has historically implemented various mechanisms to ensure fair and transparent price discovery for listed companies. These include price bands and call-auction sessions aimed at reducing volatility and manipulation. However, the existing framework falls short in addressing the unique challenges faced by ICs and IHCs.

Need for Review:

Two contrasting viewpoints have emerged regarding price discovery: investors argue for a fair determination of prices, while companies assert that market forces already dictate prices. To bridge this gap, a comprehensive review of the existing framework is imperative to safeguard investor interests and foster transparent price discovery.

Proposal:

A novel special call-auction mechanism, devoid of price bands, is proposed for listed ICs and IHCs experiencing significant discounts to their book values. This mechanism aims to unlock fair value and stimulate liquidity in these securities. Key criteria for eligibility include industry classification, trading history, and asset allocation in listed companies.

Public Consultation:

Stakeholder feedback is solicited on various aspects of the proposal, including the need for a special call-auction mechanism, criteria for company identification, computation of discounts, and disclosure requirements. The consultation period provides an opportunity for market participants to voice their opinions and shape the future of price discovery in ICs and IHCs.

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