The Securities and Exchange Board of India reduced the cooling-off period for offer for sale transactions in privately listed illiquid InvITs to plus-or-minus eight weeks. This framework replaces the earlier 12-week mandatory window previously assigned to illiquid units. Privately listed InvITs often suffer from thin trading volumes because large trading lot sizes restrict participation mainly to institutional investors, body corporates, and high-net-worth individuals. The immediate regulatory change was implemented following direct consultations and feedback from market participants.
Key points
High trading lot sizes limit market participation primarily to high-net-worth individuals…: High trading lot sizes limit market participation primarily to high-net-worth individuals, body corporates, and institutional investors.
Thin trading volumes frequently cause privately listed infrastructure investment trusts t…: Thin trading volumes frequently cause privately listed infrastructure investment trusts to be classified as illiquid.
Sebi reduced the trading window to eight weeks to facilitate the ease of doing business b…: Sebi reduced the trading window to eight weeks to facilitate the ease of doing business based on market feedback.
Sources checked by our analysis pipeline: 1
At present, the cooling-off period for transactions - purchases or sales before and after an OFS - is based on liquidity. It stands at two weeks for the most liquid shares, four weeks for liquid shares and 12 weeks for illiquid shares.
Privately listed InvITs face inherent liquidity constraints due to their high trading lot size, which limits participation largely to institutional investors, body corporates and high-net-worth individuals.
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Consequently, trading volumes in such InvITs tend to remain thin and they may fall under the illiquid category because of these structural liquidity constraints.
"Based on the feedback received from market participants and in order to facilitate ease of doing business, it has been decided to reduce the cooling off period for illiquid private listed InvITs. The cooling off period in case of private listed InvITs whose units are illiquid shall be ±8 weeks," the Securities and Exchange Board of India (Sebi) said in its circular.
This will come into force with immediate effect, according to Sebi.
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