SEBI’s ‘Unaffected Market Price Framework’
Ensuring Fairness
SEBI’s ‘Unaffected Market Price Framework’
Contents 1. Background 5 2. Applicability of Framework 5 3. The Calculation for Determination of Unaffected Price 5 4. Adjustment for Price Variation 6 5. Applicability of Unaffected Price and Its Period 6 6. Multiple Rumours 6 7. Illustration of Unaffected Price Applicability 7 8. Conclusion 7
1. Background
In accordance with Regulation 30(11) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, listed entities must verify market rumours upon a material price movement. According to the LODR Regulations1, the unaffected price shall be considered for transactions where SEBI or stock exchange pricing norms apply, provided the rumour related to such a transaction is confirmed within 24 hours of the material price movement trigger.
The unaffected price is the security price unaffected by market rumours or significant price movements. It is calculated by excluding the impact of these movements and rumours on the equity shares of a listed entity.
Through a Circular2, SEBI has issued a framework for top entities to consider unaffected prices in the event of market rumours. The key highlights are listed in the points below.
2. Applicability of Framework
The unaffected price framework will be implemented in stages:
• From June 1, 2024, for the top 100 listed entities
• From December 1, 2024, for the top 250 listed entities (including the next top 150)
This framework introduces the adjusted daily Volume Weighted Average Price (VWAP) computation by excluding variations linked to rumours and their confirmation.
3. The Calculation for Determination of Unaffected Price
The unaffected price is determined by excluding the impact on the equity share price due to material price movement and rumour confirmation. The adjusted VWAP calculation is as follows:
• Daily WAP Variation – From the day of material price movement to the end of the next trading day after rumour confirmation, attributed to the rumour and its confirmation
1 Second proviso of Regulation 30(11) of the SEBI (LODR) Regulations, 2015
2 Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2024/51, Dated 21.05.2024
5 Ensuring Fairness SEBI’s ‘Unaffected Market Price Framework’
• Adjusted Daily WAP – Calculated by excluding the WAP variation from the daily WAP in the look-back period starting from the day of material price movement. The adjusted daily WAP from this period shall match the daily WAP of the trading day before the material price movement
• Adjusted VWAP – Based on the adjusted daily WAP calculated above
4. Adjustment for Price Variation
If the price variation due to rumour confirmation breaches the price band limit on the subsequent trading day, adjustments will continue until the price stabilizes within the band limit.
5. Applicability of Unaffected Price and Its Period
The unaffected price applies only if the listed entity confirms the rumour within 24 hours from the trigger of the material price movement. It remains valid for 60 or 180 days, depending on the transaction stage, from the date of rumour confirmation until the ‘relevant date’ (public announcement, board approval, etc.).
Stock exchanges on their websites will notify the final framework to determine the ‘Material Price Movement’. ‘Material Price Movement’ refers to significant changes in the security price that could impact investor decisions or market sentiment.
6. Multiple Rumours
If additional rumours with significant updates to the transaction appear in mainstream media, requiring further confirmation under Regulation 30(11) of the LODR Regulations, the unaffected price will apply to each instance of rumour confirmation.
Example:
• A rumour confirmed on July 28, 2023, makes the unaffected price valid until September 26, 2023 (60 days from confirmation)
6 Ensuring Fairness SEBI’s ‘Unaffected Market Price Framework’
• Another rumour confirmed on August 28, 2023, extends the unaffected price validity to October 27, 2023, maintaining the 60-day validity from each confirmation date
7.
Illustration of Unaffected Price Applicability
S. No. Relevant Date (Approval by Board of Directors to Preferential Issue to QIBs) Applicability for Rumour Confirmation on July 28, 2023 Applicability for Rumour Confirmation on August 28, 2023
1 July 29, 2023 to August 28, 2023 Applicable Not applicable
2 August 29, 2023 to September 26, 2023 Applicable Applicable
3 September 27, 2023 to October 27, 2023 Not applicable Applicable
4 October 28, 2023 onwards Not applicable Not applicable
8. Conclusion
Introducing the unaffected price framework is a significant step towards enhancing market transparency and fairness. By calculating the adjusted daily VWAP, excluding variations due to market rumours and their confirmation, this framework ensures a level playing field, safeguards against market manipulation, and fosters investor confidence and market stability.
7 Ensuring Fairness SEBI’s ‘Unaffected Market Price Framework’
