SEBI Introduces New Framework For Unaffected Price Determination And Market Rumour Verification

Framework for Unaffected Price Calculation

Under the revised Regulation 30(11) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, listed entities must now confirm market rumours within 24 hours if these rumours cause a material price movement. The new framework, effective from June 1, 2024, for the top 100 listed entities and from December 1, 2024, for the top 250 entities, stats that the unaffected price will be derived by excluding the price impact of both the rumour and its subsequent confirmation. This price will be determined using the adjusted volume-weighted average price (VWAP) methodology.

The process involves calculating the adjusted daily VWAP by eliminating the variations attributed to the rumour and its confirmation. For instance, if a significant price movement occurs on July 27, the adjusted daily VWAP from July 27 to July 31 (the next trading day after the rumour confirmation) would be set to the VWAP of July 26, the trading day before the material price movement. The adjusted VWAP for the look-back period is then calculated based on these adjusted daily WAPs.

The unaffected price remains valid for either 60 or 180 days, depending on the transaction stage, from the rumour confirmation date to the relevant date under existing regulations, such as public announcements or board approvals. If there are subsequent material updates related to the same transaction, the unaffected price will apply for 60 days from the latest confirmation.

Market Rumour Verification

SEBI has also outlined a framework for verifying market rumours. The regulator amended rules governing insider trading, specifying that unverified information reported in the media is not to be considered as generally available information. Generally available information must be accessible to the public on a non-discriminatory basis. These amendments also affect takeover and buyback norms which allows the exclusion of price effects due to material price movements and rumour confirmations when determining open offer prices.

Revamped Market Capitalisation Calculation

In addition to the framework for unaffected price and market rumour verification, SEBI has revamped the methodology for calculating the market capitalisation of listed companies. Effective December 31, 2024, the market capitalisation will be determined based on the average market capitalisation over a six-month period, rather than a single day's market capitalisation (previously March 31). This change is based on recommendations from an expert committee chaired by SEBI's former whole-time member S.K. Mohanty, aiming to more accurately reflect a company's market size over a reasonable period, thus promoting ease of doing business.

To maintain uniformity, SEBI has also harmonised the timeline for prior intimation of board meetings to two working days for all event types. Current LODR regulations require listed companies to inform stock exchanges about board meetings concerning certain proposals, such as financial results and share buybacks, within 2 to 11 working days.

Click Here To Read/Download Order