In a move to streamline the post-bonus issue process, the Securities and Exchange Board of India (SEBI) has proposed new guidelines to ensure timely credit and trading of bonus shares. The aim is to implement T+2 trading (trading within two working days) of such shares after the record date.
Under the current Issue of Capital and Disclosure Requirements (ICDR) regulations, there are general timelines for bonus issues but no specific guidelines for the crediting and trading of these shares from the record date. This lack of specificity has led to inconsistencies, with bonus shares becoming available for trading anywhere from 2 to 7 working days post-record date, causing delays and exposing investors to market volatility.
In its consultation paper, SEBI highlighted the absence of uniformity in the timelines for credit and trading of bonus shares as a significant issue. The regulator emphasized the need for a standardized process to ensure the timely implementation of bonus issues, thus minimizing investors' risk due to delays in the credit of bonus shares.
To address this, SEBI proposes that bonus shares should be credited and available for trading within two working days (T+2) from the record date. This change aims to provide a predictable and efficient process, reducing the risk associated with delays and aligning with global best practices. Under the new guidelines, the shares allotted pursuant to a bonus issue will be made available for trading on the next working day after the allotment (T+2 day).
SEBI's proposal reflects its ongoing efforts to enhance market efficiency and investor protection by refining procedural timelines and reducing uncertainties in share trading. By standardizing the timeline for bonus share credit and trading, SEBI seeks to facilitate faster credit and reduce investors' exposure to market volatility.
The market regulator is seeking public comments on these proposed changes until August 26. This step is part of SEBI’s broader strategy to ensure that the Indian financial markets remain robust and investor-friendly.
These proposed changes are poised to bring greater uniformity and predictability to the trading of bonus shares, ensuring that investors can benefit from a more streamlined process and reduced risk of market volatility. By implementing T+2 trading for bonus shares, SEBI aims to enhance the overall efficiency of the market and align with international standards, thus fostering a more stable and reliable trading environment.
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