SEBI 2026 proposals revamp IPO call auctions, options

What SEBI has put out for consultation

SEBI has proposed a set of market microstructure changes in 2026 that target two different, but connected, frictions in Indian markets: price discovery on listing days and standardisation in derivatives. On May 21, 2026, SEBI issued a consultation paper on the pre-open call auction framework used on the day of IPO listing or re-listing, with a focus on how base price and dummy price bands work for re-listed scrips. On May 25, 2026, SEBI released another consultation paper titled Ease of Doing Business Framework for Strike Prices of Options Contracts, which is positioned as the third part of its Exchange Traded Derivatives series.

Both papers are aimed at consistent price formation and cleaner trading rules across exchanges. SEBI has also referenced concerns that existing mechanisms can lead to distorted outcomes, including instances where valid orders were rejected during call auctions due to restrictive dummy price bands.

Why the IPO and re-listing call auction is under review

The May 21 paper focuses on the pre-open call auction session used for IPOs and re-listed securities on the day they return to trading. SEBI’s stated intent is to improve the quality of price discovery and address concerns that the current framework for re-listed stocks can lead to “artificially suppressed price discovery”. According to the report cited, this suppressed discovery can then spill over into normal trading as persistent buying pressure and repeated upper circuit movements.

SEBI also pointed to an example where nearly 90% of buy orders during a call auction for a re-listed stock were rejected because they fell outside the prescribed dummy price bands. That data point is being used to justify more flexible, more uniform, and more automated band management.

Base price rules: what stays the same

SEBI has proposed continuing the existing base price mechanism for:

• IPOs
• Direct listings
• Securities admitted under the permitted category
• Securities undergoing corporate restructuring

The key change is reserved for re-listed scrips, where the base price can become contentious if a security was suspended and later allowed to resume trading.

Base price methodology for re-listed scrips

SEBI’s revised methodology depends on the duration of suspension before revocation.

If revocation is within 6 months of suspension

The base price may be determined using a waterfall approach:

1. The latest close price on the relevant exchange, not older than 6 months
2. If that is not available, the latest close price on another exchange
3. If neither market price is available, the lower of the book value determined through valuation certificates issued by 2 independent chartered accountants or valuation agencies

If revocation is after 6 months of suspension

SEBI proposes that the base price should be determined using valuation certificates issued by 2 independent chartered accountants or valuation agencies. The reported version of the proposal also specifies that these valuation certificates should not be older than three months.

This structure tries to separate short suspensions, where recent market prices may still be meaningful, from longer suspensions, where SEBI appears to prefer a valuation-led anchor.

Dummy price bands: continuation, but with automatic 10% flexing

SEBI has proposed continuing the existing dummy price band mechanism for:

• IPOs
• SME IPOs
• Re-listed scrips

But the consultation paper proposes a more uniform, automated approach to flexing across exchanges.

A central proposal is automatic flexing of dummy price bands by 10% whenever the indicative equilibrium price approaches the upper or lower threshold. Additionally, where orders are present only on one side of the dummy price band, flexing may occur after validation of orders from at least 5 PAN-based unique investors.

SEBI has also proposed that flexing should occur automatically and uniformly across exchanges, should continue during the random closure period, and should not hamper efficient price discovery. The report cited specifically notes the random closure window as 9.35 am to 9.45 am, and contrasts it with the current framework where no band expansion takes place during this period.

Call auction success test: minimum participation threshold

SEBI proposes to retain the existing approach for determining equilibrium price and the common equilibrium price (CEP). The change is in what qualifies as a “successful” call auction.

Under the proposal, a call auction session would be treated as successful only if price discovery is based on orders from at least 5 PAN-based unique buyers and 5 PAN-based unique sellers. The intent is to ensure that the discovered price reflects broader participation rather than a narrow set of orders.

If the call auction is unsuccessful, the proposed outcomes differ by category:

• For IPO scrips, the stock would move to the normal market at the issue price as the base price.
• For re-listing or corporate restructuring, the call auction session would continue on subsequent trading days until price discovery occurs.

SEBI has invited public comments on these proposals until June 11.

Options consultation: toward a uniform, intraday strike-price framework

In a separate consultation paper dated May 25, 2026, SEBI proposed changes to how strike prices in options contracts are introduced and managed. The paper aims to standardise strike price rules across asset classes and allow exchanges to introduce new strike prices during live trading hours.

This would be a shift from the existing approach where strike price series for a contract expiry are typically set at the start of the trading day or when a contract is first listed. SEBI also proposes removal of the CTM mechanism for commodity options as part of a uniform framework.

The consultation paper indicates that index options (such as Nifty, Bank Nifty, and Sensex) and stock options would follow unified strike price introduction rules, with intervals linked to the underlying price levels.

Related proposals: dynamic price bands and broader consolidation

Separately, market commentary and source-based reporting indicates SEBI is contemplating dynamic price bands for stocks that are included in any exchange’s derivatives segment, so that if a stock is in F&O on one exchange, it would be subject to dynamic price bands across all exchanges. The stated rationale in the report is to reduce temporary discrepancies among exchanges and avert price distortions, with a circular anticipated.

SEBI has also floated a broader “ease of doing business” consolidation push, including a proposal to merge overlapping provisions on trading, price bands, circuit breakers, disclosures, call auctions, PAN requirements, and daily price limits into a single consolidated framework for equity and commodity segments.

Key proposals at a glance

Market impact: what changes for trading and price formation

For re-listed securities, the combination of a revised base price anchor and automatic band flexing is designed to reduce the chance that the call auction prints a constrained or unrepresentative price. A more permissive and automated band adjustment, especially during the random closure period, directly addresses the problem SEBI cited where a large share of buy orders were rejected for being outside dummy bands.

For IPOs, the fallback of moving to normal trading at the issue price when call auction discovery fails provides a clear operational rule. For re-listings and corporate restructuring cases, extending call auctions into subsequent days until discovery occurs signals that SEBI wants the market to reach an equilibrium price before fully transitioning into normal trading.

In derivatives, allowing intraday introduction of new strikes and moving to a single national framework could reduce exchange-to-exchange differences in contract setup and improve consistency for participants who trade across venues.

Analysis: why SEBI is tightening these mechanics

Across these proposals, the common thread is standardisation and participation quality. For cash market listing day auctions, SEBI is pushing for a higher minimum breadth of unique buyers and sellers before it accepts a discovered price. For derivatives, SEBI is aiming to reduce the “patchwork” of strike price rules and enable exchanges to respond to live market moves.

The proposals also highlight a policy preference for uniformity across exchanges, whether it is dummy band flexing happening “automatically and uniformly” or a national strike-price framework intended to apply across recognised stock exchanges and commodity derivatives exchanges.

Conclusion and what to watch next

SEBI’s May 2026 consultations propose meaningful operational changes to listing day price discovery for re-listed scrips and a structural shift toward uniform, more flexible strike-price management in options. The call auction consultation is open for public comments until June 11, and further steps will depend on feedback and SEBI’s finalised circulars and implementation timelines.