SEBI asks institutional buyers to pay 100 per cent upfront for IPOs

All qualified institutional buyers will have to make 100 per cent upfront payment while subscribing to initial public offers, the Securities and Exchange Board of India (SEBI) said today.

The SEBI board, which met in Mumbai today, said the new guideline, which would be effective 1 May 2010, is meant to check demand manipulation of initial share offers.

Institutional buyers currently pay only 10 per cent at the time of subscription to IPOs.

"With effect from 1 May 2010, all types of investors would be required to bring in 100 per cent of the application money as margin along with the application for securities in public issues," SEBI said, adding, "This would avoid inflated demand in public issues and provide level playing field to all investors subscribing for securities."

SEBI also announced an easing of rules for derivatives trading in the stock exchanges.

The regulator further decided in principle to allow stock exchanges to introduce equity derivatives contracts with tenures up to 5 years.