Regulated pre-IPO trading platform to bring transparency: Experts

Market regulator Security Exchange Board of India (SEBI) plan to introduce a regulated pre-IPO trading platform could reshape how investors buy and sell unlisted shares, bringing transparency to a space long dominated by the opaque grey market and reducing risks for retail investors, market experts said.

- PRESS TRUST OF INDIA

Moreover, for employees, especially those holding ESOPs (employee stock options), the framework could be a game-changer.

Rajesh Singla, founder and CEO of Planify, which deals in buying and selling of unlisted shares, explained that a large portion of ESOPs remains unutilised today as employees lack access to liquidity options before an initial public offering (IPO). With SEBI proposed system, they would finally have an avenue to monetise their holdings in a regulated environment.

Friday, SEBI chairman Tuhin Kanta Pandey hinted at introducing a regulated platform for pre-IPO share trading, potentially replacing existing grey market practices.

The move, if implemented, may also allow investors to trade shares in a transparent environment during the three-day gap between allotment and listing. At present, this window is dominated by the unregulated grey market, which could be replaced by a formal mechanism.

Currently, the grey market functions as an informal over-the-counter network, where brokers and investors negotiate deals based on the expected listing price. The Grey Market Premium (GMP) often emerges as the key sentiment indicator.