Security Market Operations

Listing of Securities – Concept, Benefits and Procedure of Listing of Securities in Stock Exchange

Registration of companies shares with the stock exchange ( s ) is called ” listing of security “. It is compulsory for every public company to get itself registered with the stock exchange ( s ) as unregistered securities cannot be traded ( bought / sold ) in the secondary market.

According to the promulgation of companies ( amendment ) act 1988, it is mandatory for every public company to get itself listed with at least one of the stock exchanges so that liquidity or marketability of the security can be maintained. Listed companies are obliged to pay listing fee and to fulfill exchange’s disclosure requirements such as providing timely information to its shareholders.

Benefits Of Listing

(1) Liquidity – Admission of a security on the recognised stock exchange enables its trading in the secondary market.

(2) Best Price – Market price on the stock exchange is determined by considering the availability of number of buyers and sellers for the security.

(3) Periodic Reports – Every listed company is obliged to share its financial report with the stock exchange ( s ) failure to which can cause delisting of security.

(4) Wide Publicity – Trading in the secondary market makes securities information public such as their opening / closing prices, EPS ( Earning per Share ) etc. are uploaded on the websites and are also printed in the news papers.

Listing Procedure

(1) Submission of Letter of Application – According to Section 73 of the Companies Act, 1956, a public limited company seeking admission on the recognized stock exchange has to submit application for listing along with supporting documents required by the stock exchange ( s ) before the submission of prospectus with the Registrar of the Companies ( ROCs ). Stock exchange confirms the receipt of application just after the inspection of application received from the applicant. The exchange may ask applicant company to submit missing document ( if any ) within ten working days.

(2) Compliance with Stock Exchange Rules – Applicant Company has to follow rules and regulations laid down by the stock exchange in addition to SEBI requirements such as process of allotment of securities in case of book building method must be completed within 15 days after the closure of the issue failure to which makes companies liable to pay 15 % interest to the investors.

(3) Trading Permission – An applicant company seeks trading permission only if it fulfills all the formalities ( such as allotment of securities, transfer of shares in investors ‘ demat a/c certificates / credit in depository accounts and refund orders ) within the time limit specified in the SEBI ( Disclosure and Investor Protection ) Guidelines 2000.

(4) Deposit Security – Companies seeking trading in the secondary market is required to deposit 1 per cent of the issue amount as security with the stock exchange ( s ). Stock exchange ( s ) can confiscate the security in the event of non redressal of complainants ‘ grievances such as delay in the transfer of securities, non payment of dividend, non – payment of commission to underwriters etc.

(5) Listing Fee – Every company is obliged to pay annual listing fee to the stock exchange ( s ) which is determined on the basis of companies paid up capital.

About the author

Sarvesh Arora

Leave a Comment