Leading stock exchanges BSE and NSE on Monday said that stocks in the small and medium enterprises (SME) segment will come under the framework of Additional Surveillance Measures (ASM) and trade-to-trade settlement to curb volatility in such shares.
The move is aimed at curbing speculative trading in the SME space, where retail participation has been increasing.
In a joint surveillance meeting of exchanges and market regulator Securities and Exchange Board of India (Sebi), it has been decided that the short-term ASM framework and trade-for-trade framework will be extended to SME stocks subject to certain changes, according to circulars issued by BSE and NSE.
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A stock can be placed under additional surveillance measure in case it falls under a certain basis including high variation between high and low prices and variation in volumes as compared to the monthly average. Moreover, such shares attract higher margin requirements.
In the trade-for-trade (TFT) framework, speculative trading is not allowed and delivery of shares and payment of consideration amount is mandatory.
"TFT framework shall be in conjunction with all other prevailing surveillance measures being imposed by the exchanges from time to time," the exchanges said. Further, they said that shortlisting securities under TFT would be purely on account of market surveillance, and it should not be construed as an adverse action against the concerned company or entity.
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The new frameworks will be made available by October 3, the circulars noted. The Sebi and exchanges, in a bid to enhance market integrity and safeguard the interests of investors, have been introducing various enhanced pre-emptive surveillance measures from time to time.
Earlier, the exchanges put in place an enhanced surveillance mechanism for companies that have a market cap of less than Rs 500 crore.
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