Trading Window Closure
Trading window closure refers to the restriction imposed on designated persons and their immediate relatives from trading in shares of a listed company during periods when UPSI is likely to be in their possession, as mandated under the SEBI (Prohibition of Insider Trading) Regulations 2015.
The trading window is a compliance mechanism under Schedule B of the SEBI PIT Regulations 2015 that imposes a blanket prohibition on trading by designated persons (DPs) of listed companies during specified blackout periods. It is a practical implementation of the insider trading prohibition, providing a bright-line rule that is easier to administer than a transaction-by-transaction UPSI assessment.
The trading window is closed from the time when any person in the company or its subsidiaries first comes to know of UPSI until 48 hours after the UPSI becomes generally available to the public. In practice, the most significant and recurring trading window closure is around quarterly financial results: companies typically close the trading window approximately six to eight weeks before the board meeting that approves financial results, and reopen it two trading days after the results are published.
The 48-hour gap after public disclosure (introduced through a SEBI amendment in 2019) ensures that the market has had sufficient time to absorb the disclosed information before designated persons may resume trading. Prior to this amendment, trading was permitted immediately after disclosure.
Designated persons include directors, key managerial personnel, and such other employees who, due to their roles, are likely to have access to UPSI on a regular basis. The compliance officer of the company is responsible for determining the list of designated persons and updating it periodically.
Even outside the formal trading window closure period, DPs must obtain pre-clearance from the compliance officer for trades exceeding specified thresholds (typically Rs 10 lakh in value). Pre-clearance is typically valid for seven trading days and requires the DP to submit a declaration that they are not in possession of any UPSI.
Violations of trading window provisions can attract penalties under Sections 15G and 15H of the SEBI Act, which include monetary fines and disgorgement of profits.