SEBI Accelerates Bonus Share Trading to T+2 Days After Record Date

Markets regulator Sebi has introduced new guidelines to expedite the process of crediting and trading bonus shares. Starting October 1, investors will be able to trade bonus shares just two days after the record date. This change aims to enhance market efficiency and reduce delays.

Representative image

Currently, after a bonus issue, existing shares continue to trade under the same ISIN, and the new bonus shares are credited and available for trading within 2-7 working days after the record date. The new guidelines will enable trading in bonus shares on the second working day (T+2) after the record date.

New Guidelines for Bonus Shares

The Securities and Exchange Board of India (Sebi) announced that these guidelines will apply to all bonus issues declared on or after October 1, 2024. This move is expected to benefit both issuers and investors by reducing the time gap between bonus share allotment and trading.

Sebi's circular stated that companies proposing a bonus issue must apply for in-principle approval from the stock exchange within five working days of the board meeting that approved the bonus. This ensures a streamlined process for all parties involved.

When a company sets the record date (T day) for the bonus issue, it must note the deemed date of allotment, which is the next working day (T+1 day). This step is crucial for timely processing and crediting of bonus shares.

Operational Procedures Simplified

After receiving the record date and necessary documents, stock exchanges will issue a confirmation notice. This notice will include the deemed allotment date and the number of shares being issued as bonuses. Issuers must submit all documents to depositories by 12 pm on T+1 day to facilitate quick credit of bonus shares.

Sebi has also eliminated the earlier requirement to use a temporary ISIN for bonus shares. Now, companies can directly credit bonus shares into their existing permanent ISIN. This change simplifies the process and reduces administrative burdens.

The current ICDR Issue of Capital and Disclosure Requirements rules prescribe overall timelines regarding the implementation of the bonus issue. However, there was no specific timeline for crediting and trading such shares from the record date until now.

This initiative by Sebi is expected to streamline operations in the stock market. By reducing delays in trading bonus shares, it aims to create a more efficient market environment for both issuers and investors.

The new guidelines reflect Sebi's commitment to improving market processes. By ensuring quicker access to trading bonus shares, they aim to enhance investor confidence and market participation.

This development marks a significant step towards modernising India's financial markets. It aligns with global best practices and aims to provide a seamless experience for market participants.

The changes introduced by Sebi are set to take effect from October 1, 2024. Market participants are advised to familiarise themselves with these new procedures to ensure compliance and benefit from improved market efficiency.