SEBI's Proposed "When-Listed" Platform for Pre-Listing Trading

SEBI’s Proposed “When-Listed” Platform for Pre-Listing Trading

Discover the When-Listed platform for pre-listing trading, its features, benefits, and how it enables early investment opportunities in upcoming public listings.

Table of Contents

Context: SEBI is planning to introduce a “when-listed” platform to regulate the trading of shares in the period between the allotment of shares after an Initial Public Offering (IPO) bid closure and the official listing on stock exchanges.

About “When-Listed” Platform

It will allow the trading of newly allotted but yet-to-be-listed shares in a regulated manner.
It aims to curb grey market activity, which is the unofficial and unregulated trading of shares before they are listed.
According to the SEBI Chairperson, the move will provide a formal alternative to “kerb trading” (grey market trading) and bring transparency to the process.

Grey Market & Its Impact

The grey market refers to an unofficial cash market where shares of an upcoming IPO are traded before the official listing.
Trading in the grey market happens based on demand and supply principles.

How Grey Market Trading Works

When a company announces an IPO, grey market brokers start operating.
The IPO price band is fixed (e.g., ₹90-100 per share).
A premium (e.g., ₹10, ₹20, ₹30) is added based on demand expectations.
Investors bid for shares in the grey market before allotment.
On listing day, if the stock opens higher than the grey market price, grey market operators pay the profit to the investors.
If the stock falls below the purchase price, the investor incurs a loss.

Issues with Grey Market Trading

Unregulated & Risky: No legal oversight, leading to potential fraud and unfair practices.
Speculative & Volatile: Can create misleading price expectations.
Retail Investor Risk: Many small investors rely on grey market premiums to decide on IPO investments.

Current IPO Timeline & SEBI’s Concerns

The existing T+3 IPO listing system works as follows:

T (IPO Closure Day): IPO subscription closes.
T+1: Allotment of shares takes place.
T+3: Shares officially listed on stock exchanges.

Problem

During the gap between T+1 and T+3, grey market trading booms.
SEBI believes investors should trade in a regulated space instead of engaging in kerb trading.

How Will the “When-Listed” Platform Work?

Once IPO shares are allotted (T+1), investors can start officially trading them on the “when-listed” platform.
It will eliminate grey market dependency by providing a regulated environment for pre-listing trades.