SEBI Introduces New Framework For Unaffected Price

About New Framework

• The Securities and Exchange Board of India (SEBI) introduced a framework centred around the concept of "unaffected price" to tackle the impact of market rumours on stock prices.
• Purpose: The framework aims to maintain a reasonable price for a scrip, excluding any undesired influence before the rumour is confirmed or refuted, thereby helping both companies and investors.
• Implementation: The framework will be implemented in phases:
  • Phase 1 (June 1): Applies to the top 100 listed entities.
  • Phase 2 (December 1): Applies to the top 250 listed entities.
• How "Unaffected Price" works: The "unaffected price" is the price of the scrip before a particular rumour emerged and became public. This mechanism ensures a fair price discovery process, protecting the interests of market participants.
• Benefits: The framework is expected to:
  • Improve market integrity by promoting transparency and faster responses from listed companies.
  • Enhance confidence among investors.
  • Reduce speculative activity.
  • Ensure a level playing field for buybacks, mergers and acquisitions, and other transactions.

Timeframe: The "unaffected price" must be determined within 24 hours of any material price movement excluding the rumour.

Q.1. What is SEBI and its function?

SEBI stands for Securities and Exchange Board of India, a statutory regulatory body responsible for protecting investor interests and regulating the securities market. Its functions include: Prohibiting insider trading, price rigging, and fraudulent practices, Regulating intermediaries, stock exchanges, and corporate activities, Educating investors, promoting fair practices, and developing the securities market.

Source: SEBI’s framework to shield stock prices against market rumours: Explained