SEBI chairman hints at introducing regulated platform for pre-IPO companies; what we know so far

SEBI Chairman Tuhin Kanta Pandey, on Thursday, August 20, hinted that the market regulator may introduce a regulated platform where pre-IPO (initial public offering) companies will be able to trade after making certain disclosures.

Speaking at an event organised by FICCI, Pandey said pre-listing information is often not enough for investors to make an investment decision.

He hinted at an initiative "on a pilot basis for a regulated venue where pre-IPO companies can choose to trade subject to certain disclosures."

This initiative is expected to eliminate unnecessary processes and pain points that cause avoidable friction in fundraising, disclosures, and investor onboarding, he said.

Additionally, this will explore emerging areas, products, and asset classes that create both demand and supply of capital.

When asked whether there is any discussion with depositories on the pre-IPO trading platform, he said, "This is only in principle with what I'm stating".

This new platform may permit investors to trade shares in a regulated manner in the three days between IPO allotment and listing. This initiative may replace the existing unregulated grey market, which currently operates during this period.

SEBI plans to improve tenure, maturity of equity products

SEBI is also looking to improve the tenure and maturity of equity derivatives products in a calibrated manner, Pandey said at the same event.

He added that volumes in the cash market have grown rapidly, doubling in terms of daily traded volumes over three years.

"We will consult with stakeholders on ways to improve in a calibrated manner and the maturity profile of derivative products so that they better serve hedging and long-term investing," Pandey said.

While he emphasised that equity derivatives play a key role in capital formation, SEBI still needs to make sure of quality and balance.

SEBI is seeking ways to deepen cash equities markets, while enhancing the quality of derivatives through longer-tenure products.