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MCX IPO – Price Discovery Mechanism being Applied for First Time

MCX IPO Listing Date

MCX IPO which is being listed on 09 Mar 2012 will become first IPO to list with listing price discovery regulation. This means that for first hour of the day, price will be discovered by using call auction in the first hour of the day between 9AM to 10 AM.

Price Discovery Mechanism

Now what does Price Discovery Mechanism or call auction means that if the price of MCX has got a base price of Rs ‘X’, than the circuit which will be applied on higher side will be X+(20%of X) and X-(20%of X) for the rest of the day.

Thus due to price discovery mechanism we do not foresee high listing gains which could have had been seen without this mechanism being in place.

Verdict

This is good for the IPOs as promoters or unscrupulous elements can not jack up the prices arbitrarily. This is a good initiative by SEBI to impose call auction in first hour of the listing.

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