The Securities and Exchange Board of India (SEBI) has released new guidelines aimed at managing the impact of market rumours on stock prices, according to a circular dated May 21.
Staggered Implementation
The new regulations will be implemented in phases. They will apply to the top 100 listed entities starting June 1, 2024, and to the next 150 listed entities beginning in December 2024.
Key Points of the Regulation
The regulation mandates that listed entities must verify market rumours if there is a significant price movement. The SEBI circular specifies, “Unaffected price shall be considered for transactions where pricing norms specified by SEBI or the stock exchanges are applicable, provided the rumour pertaining to such transaction has been confirmed within 24 hours from the trigger of material price movement.”
Definition of Unaffected Price
“Unaffected price” refers to the share price level that would have existed if no rumour had influenced the market.
Framework for Unaffected Price
The calculation of the adjusted volume-weighted average price (VWAP) will be used to determine the unaffected price. This involves specific methods to ensure accurate reflection of the share price without the influence of market rumours.
