SEBI makes IPOs more transparent

The Securities and Exchange Board of India, SEBI, issued a new investor protection guideline that prevents companies doing IPO from sharing information, which is not available for the outside world, with their IPO arrangers.

Previously, a company going for an IPO shared key financial information with the investment bank arranging the IPO; information which is available only to the bank and not to others. The investment bank would then prepare research reports which are based on this extra information. The reports are shared with institutional investors prior to the filing of the prospectus and are not available to retail or ordinary investors.

So, one could easily make out that the additional information would make IPO estimations by the investment bank dealing with the IPO more accurate and give institutional investors an unfair advantage against other investors. Given this situation, the tweak from SEBI which says,

“no selective or additional information or information extraneous to the offer document shall be made available by the issuer or any member of the issue management team/syndicate to any particular section of the investors or to any research analyst in any manner whatsoever including at road shows, presentations, in research or sales reports or at bidding centers”

shall provide a level playing ground for investors alike and would bridge problems associated with information asymmetry.

Related Articles
- Now Interest Rate Futures can be traded in National Stock Exchange
- SEBI mandates Rs. per share dividend declaration
- How does Short Term Capital Gain/Loss work?
- Application Supported by Blocked Amount for IPOs
- Money no longer gets locked in IPOs

Now Interest Rate Futures can be traded in National Stock Exchange

After a gap of six years, the National Stock Exchange (NSE) of India re-launched trading in Interest Rate Futures. This will give the investor an opportunity to speculate and trade with these advanced financial instruments.

Interest Rate Futures allow institutions to hedge risk associated with interest rate fluctuations. They can reduce the risk associated with cash flows resulting from underlying assets such as home loans, long term fixed deposits etc.

However, in India, the underlying asset on which the interest rate future is based on is a 10 year notional coupon bearing government security. Have a look at this small series that came in ET, which talks about few things one has to consider before trading in interest rate futures.