Sebi Proposes Faster Trading, Crediting Of Bonus Shares To Reduce Market Volatility

The Securities and Exchange Board of India (Sebi) has put forward a proposal to expedite the crediting and trading of bonus shares to reduce the risks investors face due to market volatility caused by delays. 

Currently, the process of crediting and trading bonus shares lacks specific timelines, leading to inconsistencies across the market. Under the existing system, shares continue to be traded under the same ISIN post-record date, with bonus shares being credited within 2-7 working days.

In a discussion paper, Sebi mentioned the need for uniformity and timely implementation of bonus issues. To address this, the regulatory body suggested that shares be made available for trading within two days (T+2) post-record date. 

This change is expected to streamline processes and ensure that investors have access to their bonus shares without unnecessary delays.

As per the current regulations, companies announcing a bonus issue must implement it within 15 days of board approval. However, the absence of clear guidelines on the specific timelines for crediting and trading these shares has led to non-uniform practices. Sebi’s proposed measures are expected to rectify this by prescribing specific timelines, ensuring that the bonus issues are completed efficiently and uniformly across the market.

The move to faster crediting and trading is part of Sebi’s broader effort to enhance market efficiency and protect investors from the adverse effects of market fluctuations that can occur when there are delays in crediting bonus shares. By setting clear timelines, SEBI is looking to provide greater certainty and stability to the trading process of bonus shares.