SEBI reduces listing of securities from T+6 to T+3

The Capital market regulator Securities Exchange Board of India (SEBI)  in a circular issued on 9 August 2023  has reduced the timeline for listing of securities after the closure of the Public issue to three days from the present six days.   The securities will now have to be listed on T+3 days as against the present T+6 days.

It will be optional for public issues opening after 1st September  2023, SEBI has made T+3 compulsory for the public issues opening after 1st December 2023. 

Securities are  a type of negotiable instrument which is issued to raise money from the market and it can be bought and sold in the market. Shares,bonds,debentures etc are an example of securities .  

What is T in the capital  market ?

T stands for transaction date in the capital market.It is the date on which transaction has taken place .  1,2,3 denotes the day. It tells us after how  many days the settlement will take place .   

For example  If a company XYZcomes out with a public issue and sells one lakh shares of the company at a price of Rs 100 per share to the public  to raise capital for its business. Suppose the company fixes  the opening date of the public issue as 1st August and the closing day as  5th August. It means that if anyone from the public wants to buy the share of the company they have to apply between 1-5 August. 

An investor Mr.  X applies for 100 shares .It means that he has to pay Rs 10,000 to the company along with the application form.

After the closure of the issue on 5th August the company will allot shares to the  successful investors ,who have applied for the shares. It means the company will keep Rs 10,000 of Mr.X and allot him 100 shares . 

After allotting the share to the successful applicants the company will list its one lakh shares on a stock exchange like NSE,BSE. Now if any one wants to buy or sell the company’s shares then it will do so through the stock exchange .

Till date the company had to list its shares on T+6 days .  In the given  example the T date is 5th August hence the shares sold by the company to the public will be listed on a recognised stock exchange on 11th of August . Now  SEBI has  proposed to reduce it to T+3 days i,e by 8th of August .

So according to the proposed rule of SEBI :

• The  company will have to finalise the allotment of shares before 6 P.M on T+1 day. 

• The  company has to return the money of the unsuccessful investors on T+2 days.

• The  company has to list the company’s shares on T+3 days.

Benefits of the reduction in listing to T+3

• According to SEBI  the reduction in the listing timeline is expected to benefit stakeholders as issuers would receive their funds and allottees would receive their shares in a shorter time period.

• The investors who were not allotted shares would receive their money back quickly.

What is a Public issue?

When the company issues/offers its securities (shares, bonds,debenture)  to the new investor it is called public issues.

The public issues are further classified into Initial Public Offering (IPO) and Further-on Public offering (FPO).

Initial Public Offering  (IPO)

When an unlisted company sells its securities  to the public ,it is called Initial Public Offerings (IPO). 

After the successful completion of the IPO the offered shares, bond or debenture of the companies are listed on a recognised stock exchange. 

The company whose shares, bond or debenture are not listed on any stock exchange is called an Unlisted company.

Further on Public Offering (FPO)

When a listed company  sells its securities to the public it is called Further-on Public offering (FPO). 

The company  whose securities ,ie. shares, bond or debenture are  listed on any recognised stock exchange  is called a Listed company.

Securities Exchange Board of India(SEBI)

Securities Exchange Board of India(SEBI) was set up on 12 April 1988 and it was given statutory status by the SEBI Act 1992 on 30 January 1992.

• It comes under the Ministry of Finance , Government of India .

• It is the regulator of the Capital market and Commodities market in India .

• The first SEBI chairman was Dr S A Dave (1988-90)

• Madhabi Puri Buch is the current and 10th Chairperson of the SEBI.

• Headquarters : Mumbai