MCX Listing and Pre-open session for IPOs

We have already seen how the pre-open session or call auction trading session for existing securities works. And similarly for the new listings of the IPOs during listing day, the exchanges have introduced a Special Pre-Open Session (SPOS) for IPOs and re-listed scrips.

Salient Features of Special Pre-open Session :

1. This session shall be conducted for IPO scrips only on the first day of trading, i.e. day of listing of the scrip on the Exchange and for Re-listed scrips only on the day of re-commencement of trading of that scrip on the Exchange.
2. SPOS shall be for duration of 60 minutes from 9:00am – 10:00am for scrips participating in that session and shall be followed by continuous trading session.
3. From the next trading day onwards, trading would be normal.
4. Only limit orders will be permitted during the special pre-open session and Market orders will not be accepted.
5. For IPOs of Issue size greater than Rs.250 cr – during pre-open session, there would no Price Bands. But, during the normal trading session it would be 20% of Equilibrium Price (Listing price).
For smaller issues, with size of less than Rs.250 cr., the price bands are 5%.

The above point is interesting, since there wouldn’t be no 50/100 % moves after the listing price, which is intended to curtail huge swings in stock prices post-listing.For e.g., if the MCX issue price is fixed at Rs.1000 and during the pre-open session, the price discovered is at 1200, then the price band is fixed at 20% of the listing price, on either side. And because of this new method the volatility on the listing is expected to be substantially reduced.

MCX listing date is to going to be an interesting session, since this is the first time an IPO is being listed using the above methodology. Let us wait and watch, how the new method is being implemented.