Talking to reporters on the sidelines of the 6th Annual Financial Services Convention, Sebi chairman DR Mehta said that discretionary allotments to retail investors in a book-built issue have been done away with and it has been decided to follow a system of proportionate allotments.

The changed norms are in line with the practices followed in the more advanced markets of the west, where book runners, their associates and anyone even remotely connected with the book-building process in any way are barred from the bidding for the issue.

Mehta explained that banks, FIs and MFs would be exempted from this, as they are major players in the primary market in India and barring them at this juncture would upset the market. What this means is that if SBI Caps is the book-runner to a public issue, State Bank of India - which can be described as its associate - would not be barred from the bidding.

The norms on book-building were formulated around three years back, but it is only now that the various items in it are coming up for question and becoming issues, Mehta said.

Incidentally, Mehta said that the Sebi has also given in-principle approval for application to Initial Public Offering to be routed through stock exchanges as an ordinary share transaction. Some time back, the Bombay Stock Exchange had submitted a proposal to the markets regulator on this issue. An applicant to a new issue should be able to place a buy order on the concerned broker and the client's account will be debited on allotment taking place. The entire transaction takes place as in the secondary market; only in this case, new shares are the instruments.

Along with the meeting on February 8 to consider addition to the number of scrips under rolling settlement and whether to introduce badla in this format, Sebi will also be looking at the issue of demat (bringing in all scrips compulsorily into demat mode) as rolling settlement is inseparable from electronic mode of trading.