The Securities and Exchange Board of India (Sebi) on Saturday said

institutional investors have to

RELATED ARTICLES Sebi asks firms to disclose details of utilisation of warrants Sebi to give MCA names of over 500 cos who violated CIS rules Sebi seeks external consultant for overhaul of role, structure Sebi opens new window for promoters to dilute stake Sebi imposes Rs 40 lakh penalty on four individuals

pay 100 per cent of the value of

shares in all new share sales at the time of application from May 1,2010, bringing them on par with retail investors. At present, the

Qualified Institutional Buyers (QIBs) are required to pay only 10 per cent of the value of the shares at the time of application.

In another significant move, the regulator has also decided to allow physical delivery of shares in equity derivatives, but the date of its implementation will be decided only after consultation with stock exchanges. Sebi has also decided to allow 5-year contracts in derivatives segment, besides introducing new derivative contract basedon the volatility index.

The Board also decided that the reservation for employees in

public/rights issues would be available to employees of subsidiaries and material associates of the issuer whose financial statements are consolidated with the issuer’s financial statements.

The Sebi took the key decisions at a board meeting, which was attended by Finance Minister Pranab Mukherjee.

Sebi Chairman C B Bhave told a news conference that its decision to

ask QIBs to pay full amount while applying for new share sales was in line with its efforts to bring down the date of close of an initial public offering (IPO) and listing of shares to one week by the end of this calendar. Under normal circumstances, at present, it takes about 21 days for companies to list their shares after the close of the IPO.

By making 100 per cent compulsory for QIBs at the time of bidding, the regulator also intends to curb the practise adopted by some

institutional investors to bid aggressively for shares, making the IPO

several times subscribed. “This would avoid inflated demand in public issues,” the regulator said.

“Since they can bid by paying only 10 per cent of the value, QIBs bid for more shares – more than what they require, giving themselves a cushion for over subscription. Retail investors usually apply for shares based on the number of times the issue is oversubscribed. Now,

over subscription in IPOs will come down,” said an investment banker.

Regarding the physical delivery in equity derivatives segment, Bhave

said Sebi has not decided whether there will be an option for

investors, or whether there will be a complete switch from cash-based

settlement to delivery-based settlement.

A derivatives analyst with a local brokerage firm said the

delivery-based settlement may make it easy for traders to manipulate

less liquid stock. “They can corner shares in cash market and demand

delivery in F&O segment at the time of expiry,” he said.