New Delhi

Marketregulator Sebi on Thursday proposed changes to the price discovery mechanism through call auction sessions for IPOs and re-listed stocks to improve price discovery and reduce artificial price suppression.

Current system of price discovery is artificially suppressing prices and triggering repeated upper circuits once trading begins, the market regulator said. It proposed automatic and faster expansion of price bands whenever strong investor demand emerges, reducing the need for manual intervention by exchanges.

Under the proposal, Sebi has suggested revising the methodology for determining the base price of re-listed stocks. If trading revocation takes place within six months of suspension, the latest closing price available within six months on the same exchange, or another exchange, would be used. In the absence of recent market prices, the lower of valuations provided by two independent chartered accountants or valuation agencies would be considered, Sebi said in its consultation paper. For revocations after six months of suspension, the base price would be determined solely on the basis of valuation certificates from two independent valuers, not older than three months.