What is SEBI's New Platform for Pre-Listing Share Trading?

India's capital market is now abuzz over the announcement of SEBI chairperson Madhabi Puri Buch regarding a radical proposal: an exchange platform where shares would be sold before they list. Traditionally, shares issued during an IPO get locked up in demat accounts until the date of listing. Investors thus find themselves sitting tight for days, without liquidity, over such locked-up shares. This proposed mechanism bridges the gap for this long-persisting problem.

The Current Problem: Grey Market Dominance

Currently, the grey market dominates the interim period between share allotment and listing. In this area, investors deal with shares without regulation, taking grey market premiums (GMP) as an unofficial measure of listing performance. GMP mostly indicates a profit, but is not subject to regulatory controls and, hence, poses threats of unfair prices and lack of transparency. Thus, unorganized trading indicates a need for a formal and safe alternative.

SEBI’s Proposed Solution

SEBI would envision a platform in which shares could be traded, post allotment but pre listing. This would:

• Control unregulated trading: Route these transactions from the grey market into a controlled space.
• Improve transparency: Fair pricing mechanisms and protection for investors.
• Benefit all investors: Retail and institutional participants gain liquidity and flexibility during the interim period.

SEBI chairperson Madhabi Puri Buch emphasized that such a mechanism would leverage regulatory frameworks to address investor needs while maintaining market integrity.

Impact on the Primary Market

This is an appropriate time for this initiative as the primary market has become buoyant. In 2024, NSE led Asia, securing top positions in offering terms as well as total equity raised by SEBI-regulated IPOs. The trend continues in 2025 where public issues with a value of Rs 1.80 lakh crore are pending nod from SEBI. Regulated pre-listing trading platform will support the growth of the market and will thus make the market more vibrant and accessible.

Investor Benefits and Market Implications

Benefits:

• Liquidity: Investors can sell their holdings without waiting for the listing date.
• Price Discovery: A regulated platform gives real-time pricing insights, thus reducing reliance on speculative GMP.
• Flexibility: Retail and institutional investors alike can adjust their portfolios earlier.

Challenges:

• Regulatory Complexity: The platform should be implemented with strict regulation to avoid misuse.
• Investor Awareness: Participants need to be educated on the benefits and risks of the platform.

Comparison with Global Practices

Pre-listing trading mechanisms in several markets of the world. For example, the United States allows pre-IPO trading in the shares of privately held companies ensuring liquidity and openness. Thus by adopting such systems, India would achieve market competitiveness to meet investor expectations.

Conclusion

SEBI’s proposed platform for trading shares pre-listing marks a significant step toward modernizing India’s capital market. By addressing the grey market’s shortcomings, it promises greater transparency, liquidity, and investor confidence. As IPO activity surges, this innovation could redefine how Indian investors approach public offerings.

Stay updated with SEBI’s developments and explore IPO opportunities seamlessly on platforms like IPOji—your gateway to India’s vibrant primary market.