Listing of Securities

Listing of Securities

For the securities of a company to be traded on a stock exchange, they have to be listed in that stock exchange. Listing is the process of including the securities of a company in the official list of the stock exchange for the purpose of trading.

At the time of issue of securities, a company has to apply for listing the securities in a recognised stock exchange. The Securities Contracts Regulation Act and rules, SERI guidelines, and the rules and regulations of the exchange prescribe the statutory requirements to be fulfilled by a company for getting its shares listed in a stock exchange. Important documents sucemorandum ossociation, articssociation, prospectus, directors’ report, annual accounts, agreement with underwriters, etc. and detailed information about the company’s activiticapital structure, distribution of shares, dividends and bonus shares issued, etc. have to be submitted to the stock exchange along with the application for listing.

The stock exchange examines whether the company satisfies the criteria prescribed for listing. When the stock exchange finds that a company is eligible for listing its securities at the exchange, the company would be required to execute a listing agreement with the stock exchange. This listing agreement contains the obligations and restrictions imposed on the company as a result of listing. The company is also required to pay the annual listing fees every year.

The purpose of the listing agreement is to compel the company to keep the shareholders and investors informed about the various activities which are likely to affect the share prices of the company. A company whose securities are listed in a stock exchange is obliged to keep the stock exchange fully informed about all matters affecting the company. Moreover, the company has to forward copies of its audited annual accounts to the stock exchange as soon-as they are issued.

The securities of companies listed on a stock exchange may be classified into different groups. For instance, the securities listed on the Bombay Stock Exchange (BSE) have been classified into A, B1, B2, F, G and Z groups. The equity shares listed in the exchange have been grouped under three groups, namely A, BI and B2, based on certain qualitative and quantitative parameters which include number of trades, value traded, etc. The F group represents the fixed income securities. The G group includes Government securities for retail investors. The Z group includes companies which have failed to comply with the listing requirements of the exchange or have failed to resolve investor complaints or have not made arrangements with the depositories for dematerialisation of their securities.

Permitted Securities

The securities of companies which have signed listing agreement with an exchange are traded at the exchange as listed securities. A stock exchange sometimes permits trading in certain securities which are not listed at the exchange but are actively traded in other stock exchanges. Such securities are known as permitted securities. This facility is provided to help market participants to trade in certain actively traded securities even though they are not formally listed at the exchange. Thus, a stock exchange may have certain listed securities and certain permitted securities, and trading may take place in these securities regularly.