SEBI’s Measures to Tackle Market Volatility

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Amid the pandemic, the Securities and Exchange Board of India (SEBI) in March came out with numerous steps to ensure orderly trading and settlement to curb high market volatility. The measures include a revision of the market-wide position limit.

SEBI says that these measures are for ensuring orderly trading and settlement and also aimed at successful risk management, price discovery, and market integrity protection. In this regard, the stock exchanges and clearing companies would provide appropriate guidance to market participants.

The initiatives have centred on restricting short-selling of securities and the volatility in individual stocks. All these steps had entered into force on 23 March. The Securities and Exchange Board of India (SEBI) on March relaxed requirements for compliance under the Minimum Public Shareholding (MPS) provision in a breather for listed companies with promoter shareholdings above the 75 per cent cap.

SEBI declared in a circular that October 10, 2017, SEBI circular stipulations are relaxed for listed entities for which the deadline to meet MPS requirements falls between March 1, 2020, and August 31, 2020. According to SEBI, the decision was taken after taking into account requests received from the listed entities and industry bodies, as well as taking into account the prevailing business and market conditions.

SEBI also requested that the respective stock exchanges not take any penal action against the listed companies which fail to dismantle the shareholdings of the promoter and also directed them to withdraw any penal action if it was initiated after March 1. The market regulator has a set timeline for promoters to shed their shareholding from the listing date on. Shareholdings will be reduced to 75 per cent within three years of listing the promoter. Public sector enterprise Coal India, according to brokerage firm Samco Securities, is one business listed on the Nifty 50 stock exchange with promoter holding more than 75 per cent mark.

The rules were intended to improve liquidity and better discovery of stock values by making higher floats available to the public. Promoter holdings in India rate among the world’s largest. According to the norms, the exchanges will place a fine of up to Rs 10,000 on companies for every day of non-compliance with the minimum public shareholding requirements. The rules also require intimate depositories exchanges to freeze any of the promoter group’s shareholdings in the company if it fails to comply.

SEBI says that these measures to tackle the market volatility will be in force till 24 September 2020.

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