Download Initial Public Offering in the Primary Market

PRIMARY MARKET
INITIAL PUBLIC OFFERING ON ISE
PRIMARY MARKET
OPERATION PRINCIPLES OF INITIAL PUBLIC OFFERING
METHODS ON THE PRIMARY MARKET OF THE
EXCHANGE
The Sale on Stock Exchange Method has been regulated by our Circular-letter dated March
11, 2011 and No. 366. Pursuant to the arrangement, sale on Stock Exchange can be realized
using 3 different methods in the framework of the Primary Market rules.
I- PRIMARY MARKET OF CORPORATIONS TO BE INITIALLY LISTED ON THE
EXCHANGE
Any one of the three sale methods below can be used in the Primary Market of Corporations
or Shares To Be Initially Listed on the Exchange. Stocks to be offered to the public on the
Exchange via the ISE Stock Market Trading System (System) are traded with the market
specification codes “BE” and “BY” on the primary market.
1- Continuous Auction Method
2- Book Building and Sale with a Fixed Price Method (Fixed Price Method)
3- Book Building and Sale with Variable Price Method (Variable Price Method)
1- Continuous Auction Method
Rules applicable to the Continuous Auction Method on the Stock Market are also applicable
to the Primary Market of Corporations or Shares To be Initially Listed on the Stock
Exchange.
This method is called the “Continuous Auction – Multiple Price Method" because buy and
sell orders transmitted to the System throughout the session can be matched at different price
levels and therefore different trading prices can occur in the same session. In this method,
trading shall take place on a continuous basis, with each incoming order being checked and
matched on a price and time priority basis.
The period of initial public offerings where the sale on Stock Exchange via Continuous
Auction Method is used has been limited to 2 business days. However, if a longer sales is
planned, the base price announced on the first day of public offering will be used as the
opening price on each day the public offering continues.
Initial public offerings of the corporations or shares to be initially listed on the Exchange on
the Primary Market via Continuous Auction shall be completed in 2 days. However, it is
possible that the brokerage house that undertakes the public offering may carry out sales for a
period longer than 2 days. Secondary market trading shall not be started so long as the initial
public offering continues.
The base price to be applied in the first session during which the shares that are sold via initial
public offering on the primary market of the Exchange via Continuous Auction are to be
traded on the secondary market is determined by rounding the weighted average price of all
2
trades executed during the public offering on the primary market to the nearest price tick, and
this price is taken as a base in calculating the lower and upper price limits to be used in the
first trading session on the secondary market.
2- Fixed Price Method
All orders are transmitted to the System at such price level which is determined and
announced by the company whose stocks are offered to public. Trades are executed at that
single price. Distribution is held automatically at such time determined by the Exchange upon
expiry of the primary market. More than one buy order can be transmitted with the same
account number. In that case, distribution is made starting from the first order with time
priority among the orders having the same account number, and the others are not subject to
distribution unless that order is exhausted.
3- Variable Price Method
All orders are transmitted to the System at such price interval which is determined and
announced by the company whose stocks are offered to public. Orders received with a price
which is outside such interval are not admitted to the System. The price of the order can be
changed within the specified interval (including minimum and maximum levels).
Trades are executed over a single price to be determined in that price interval. The price level
at which the entire offering is satisfied according to price and time priority is set as the public
offering price.
In this method, more than one buy orders can be transmitted with the same account number as
with the Fixed Price Method. In that case, distribution is made starting from the first order
with price and time priority among the orders having the same account number, and the
others are not subject to distribution unless that order is exhausted.
In all three methods, no special order can be entered to the System in the primary market of
corporations to be initially listed on the Exchange.
II- OPERATION OF FIXED PRICE AND VARIABLE PRICE METHODS
Points Common to Fixed and Variable Price Methods:
These new methods which are developed for the primary market of the exchange are
comprised of two stages:
-
Book Building Stage: At this stage, orders are collected via keyboard and ExAPI
channel. Book building period is one business day minimum and three business days
maximum. The period is determined by the Executive Council of the Exchange upon the
request of the company.
Provided that the Capital Markets Board (CMB) or the
Exchange has not decided otherwise and an announcement has been made by the company
or the brokerage house that mediates to the public offering prior to the sale, distribution
can be made without waiting the expiry of the book building period (e.g. at the end of the
first day primary market session or the second day primary market session).
3
-
Screens containing order information of the stock are closed during the Book Building
Stage as in the opening and single price session applications. No information is released
regarding orders entered until the distribution of that stock is made.
-
Distribution Stage: Orders collected are distributed to buyers as detailed below.
Points Common to Book Building Stage:
-
Session Hours: Buy orders are entered inside the primary market session hours.
-
Order Types: Only orders in the form of “limit price” normal orders are entered (limit
price sell order, short selling order, immediate or cancel order, special limit price order,
special limit value order, odd lot orders and special orders cannot be entered).
-
Order Validity Period: Orders are valid until the end of the book building period.
Whilst the period (validity date) of the order cannot be determined by the brokerage
houses, the expiry date of the order is set as the expiry date of the book building period
automatically by the System during the entry of the order, and orders are kept in the
System until the end of that period.
-
Order Cancellation: Orders can be cancelled any time within the primary market session
hours.
-
Modification of Orders: Amounts, account numbers, and Agency Fund Codes of the
orders cannot be changed, and validity periods cannot be prolonged or shortened. Orders
cannot be split.
-
Account Number Correction: Account Number and Agency Fund Code corrections at
T+1 are not permitted.
-
Maximum Lot Quantity: Determined by the Stock Market Management.
Fixed Price Example:
Quantity to be sold
Total asks received
Price
= 23 lots
= 54 lots
= 5.00 TL
An institution can transmit more than one order with the same account number (belonging to
the same person).
When making the distribution to the submitted buy orders that are ranked by time priority,
orders from the same member with the same account number are considered collectively.
First, distribution is made starting from the first order with time priority among the orders
having the same account number, and the other order and/or orders with the same account is
and/or are not subject to distribution unless that order is fully filled. If the first order is fully
filled, the other order which is ranked after it according to time priority becomes eligible for
distribution, and the distribution is proceeded with in that way.
Important Note: Account number identicalness is evaluated on a brokerage house (member)
basis. Account numbers which are transmitted from different brokerage houses and are the
same with each other are not treated collectively during the distribution phase
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In the following example, we assume that all orders are entered by a single brokerage house
and there are 2 orders entered in the name of the person with account number "A", so the first
of these 2 orders which was entered first in the system according to time priority and
consisted of 3 lots undergoes distribution first, and after it is executed, the other order
consisting of 6 lots takes the turn.
Order Rank Number
(1)
(2) (3)
(4)
(5)
Customer Account Number
Lot Quantity Asked
A
3
B
14
C
23
A
6
D
8
Quantity Remaining After First Round
Quantity Remaining After Second Round
Quantity Remaining After Third Round
Quantity Remaining After Fourth Round
Quantity Remaining After Fifth Round
Quantity Remaining After Sixth Round
2
1
0
0
0
0
13
12
11
10
9
8
22
21
20
19
18
17
6
6
6
5
4
3
7
6
5
4
3
3
TRADING VOLUME
3
6
6
3
5
Executed Trades:
Customer Account
No
(Buyer)
A
B
C
A
D
Total
Trading
Price
Trading
Volume
5.00
5.00
5.00
5.00
5.00
3
6
6
3
5
23
Variable Price Example:
Quantity to be sold
Price interval
Total bids received
: 5,000 lots
: 4.00 – 4.80 TL
: 16,000 lots
(All buy orders are entered by the same institution)
Information about buy orders ranked according to price and time priority:
5
ORDER NO
3
2
1
8
4
6
5
7
CUSTOMER
ACCOUNT
NO
A
B
A
C
D
E
F
G
PRICE
(BUY)
4.80
4.70
4.60
4.50
4.40
4.30
4.20
4.10
QUANTIT
Y
(BUY)
500
500
1,000
1,000
1,000
2,000
5,000
5,000
CUMULATIVE
QUANTITY
(BUY)
500
1,000
2,000
3,000
4,000
6,000
11,000
16,000
-
The price level at which the entire offering is satisfied in orders ranked according to price
and time priority is set as the sales price. Even if the amount asked at that price level is
higher than the amount offered, all buy orders at and above that price level are included in
the distribution.
-
In the example, the sale price is 4.30 TL.
-
After the price is determined, orders with prices lower than 4,30 TL are retained in the
System, but are ignored during the distribution.
Distribution Table
ORDE
R NO
3
2
1
8
4
6
5
7
CUSTOM
ER
ACCOUN
T NO
A
B
A
C
D
E
F
G
Total
QUANTI
PRICE
TY
(BUY)
(BUY)
4.80
4.70
4.60
4.50
4.40
4.30
4.20
4.10
500
500
1,000
1,000
1,000
2,000
5,000
5,000
16,000
TRADE
(ROUN
D 1)
TRADE
(ROUN
D 2)
TRADE
(ROUN
D 3)
REMAI
NDER
500
500
0
500
500
500
0
0
2,500
0
0
500
500
500
500
0
0
2,000
0
0
250
0
0
250
0
0
500
0
0
250
0
0
750
5,000
5,000
11,000
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Executed Orders:
Buyer
Order
No
3
2
8
4
1
6
-
Buyer
Account
No
A
B
C
D
A
E
Total
Trading
Price
4.30
4.30
4.30
4.30
4.30
4.30
Trading
Volume
500
500
1,000
1,000
750
1,250
5,000
500 lots from order number 3 and 750 lots from order number 1 are distributed to account
A
500 lots are distributed to account B,
1,000 lots are distributed to account C,
1,000 lots are distributed to account D,
1,250 lots are distributed to account E.
III- PRIMARY MARKET OF CORPORATIONS ALREADY LISTED ON THE
EXCHANGE
The stocks representing pre-emptive rights of the listed companies, which are not exercised
by the existing shareholders and stocks offered to public by restricting the pre-emptive rights
of the existing shareholders are to be traded via continuous auction.
The Exchange Management may choose Fixed Price Method or Variable Price Method
instead of Continuous Auction Method based on different markets, groups (A, B, C) or
stocks.
Base price and price margins do not apply to the public offering of shares representing
pre-emptive rights of the listed companies, which are not exercised by the existing
shareholders..
Only the designated member can place a sell order on the primary market. Shares bought
from the Primary Market cannot be resold on the Primary Market.
IV- SETTLEMENT
Settlement takes place in 2 business days (T+2) that succeeds the day on which the
distribution took place and all the trades are done (T).
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V- SESSION HOURS
PRIMARY MARKET TYPE
SALES METHOD
SESSION HOURS
Fixed Price Method
Initial Public Offering of Stocks of
Companies Not Listed on the
Exchange
Offering of the stocks
representing pre-emptive rights of
the listed companies, which are not
exercised
by
the
existing
shareholders on the ISE Primary
Variable Price Method
Continuous Auction Method
10:30 – 12:00
Public
Continuous Auction Method 1
Market
For Fixed Price Method and Variable Price Method:
Book Building Phase
Distribution Phase
: 10:30 – 12:00
: 12:15 – 12:30 2
1
The Exchange Management may choose Fixed Price Method or Variable Price Method instead of Continuous
Auction Method based on different markets, groups (A, B, C) or stocks.
2
The distribution stage that starts after 12:15 is ended according to the effect of factors such as the number of
orders received, order size, number of accounts, quantity of shares offered to public.
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SUBJECT
CONTINUOUS AUCTION
FPM
(Fixed Price Method)
VPM
(Variable Price Method)
Book Building Hours
Trading/Distribution
Hours
10:30-12:00
10:30-12:00
10:30-12:00
10:30-12:00
12:15
12:15
Price of Orders Offered
Price Determination and
Distribution Principles
Variable
(Below and above 10% based
on public offering price)
Buy and sell orders transmitted
to the System can be matched
at different price levels
throughout the session. In this
method, trading shall take
place on a continuous basis,
with each incoming order
being checked and matched on
a price and time priority basis.
Trading Price
Price/Time Priority
Multiple Price
Price and Time Priority
Distribution Date and
Time
Every day, continuous auction.
Price – Quantity
Information in Order
Format
Combining Orders with
Same Account Number
Settlement (T = Trading
Fixed
Orders are ranked according to time priority.
One lot is distributed each time until the
amount to be sold is exhausted, taking time
priority into account. Trades are finalized
only after the distribution is completed (after
what portion of each order has been filled is
ascertained). Orders entered with the same
account number from each institution are
treated collectively, and each account number
can only take one lot in each distribution
round starting from the first order entered.
Single Price
Time Priority
After the end of each Primary Market
session, it can be started until the end of that
session.
Variable
(Within the price interval determined for public
offering)
Orders are ranked according to price and time
priority. The price level at which the entire
offering is completed is set as the sale price.
Distribution is made to all buy orders which are
received at and above that price level. Trades are
finalized only after the distribution is completed
(after what portion of each order has been filled
is ascertained). Orders entered with the same
account number from each institution are
evaluated collectively, and each account number
(irrespective of the number of orders entered)
can only take one lot in each distribution round
starting from the first order entered.
Single Price
Price and Time Priority
After the end of each Primary Market session, it
can be started until the end of that session.
Current Application is Valid
Price + quantity must be stated
Price + quantity must be stated
Combining is not permitted
Combining is permitted
Combining is permitted
T+2
T+2
T+2
9
/ Distribution Day)
Inquiries
Open
Data Broadcast
Open
Data Broadcast
(Executed Orders)
Maximum Lot Limit
At Book Building Phase:
After the Distribution:
At Book Building Phase:
After the Distribution:
Closed
Open
Closed
Open
At Book Building Phase:
After the Distribution:
At Book Building Phase:
After the Distribution:
Closed
Open
Closed
Open
Open
Broadcast Starts After the Distribution
Broadcast Starts After the Distribution
Yes
Normal Order + Special Order
for Buyer and Seller
Yes
Current application is valid
Yes
Only Limit Price Orders for Buyers. Sell
order is generated by the System.
Yes
Current application is valid
Yes
Only Limit Price Orders for Buyers.
Sell order is generated by the System.
Yes
Current application is valid
Maximum 1 day
Valid until the end of the last book building
session.
Valid until the end of the last book building
session.
Allowed
Allowed at Book Building Phase
Modification of Orders
Allowed
Amounts of the orders cannot be changed,
and validity periods cannot be prolonged or
shortened. Order prices cannot be changed.
Order Split
Account Number
Correction
Allowed
No
Allowed at Book Building Phase
Amounts of the orders cannot be changed, and
validity periods cannot be prolonged or
shortened. Order prices can be changed within
the specified price interval.
No
Yes
No
No
Price Margins
Yes (10%)
No - Fixed Price
Price Ticks
Current application is valid
Special Order
Erroneous order /
transaction correction (at
T+1)
Order Types
Maximum Order Value
Customer/Portfolio/Fund
Order Validity Period
(Normal Orders + Good
Till Date Orders)
Order Cancellation
Yes
Fixed price is determined at a price tick
corresponding to the respective price level
No
There are lower and upper price limits set by
the issuer
The price tick that corresponds to the price of the
order transmitted to the system is valid
No
Yes
No
No
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