BSE, NSE Launch Additional Surveillance Measures For SME Stocks To Curtail Speculative Trading

A stock can be placed under ASM if it falls under a specific basis such as high variation between the stock’s high and low prices and fluctuations in volumes in comparison to the monthly average.

Under the trade-for-trade (TFT) framework, the exchanges bar speculative trading and mandate the delivery of shares and payment of consideration amount.

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The stock exchanges announced on Monday that stocks in the small and medium enterprises (SME) segment will come under the ambit of Additional Surveillance Measures (ASM) and trade-for-trade settlement to manage volatility in these shares. Both the NSE and BSE issued circulars stating that this move has been adopted by the exchanges after discussions with the Securities and Exchange Board of India (SEBI) in a joint surveillance meeting. The measure aims to control speculative trading in the SME category, which has seen an increase in retail participants.

The circular explained that the short-term ASM framework and trade-for-trade framework will now include SME stocks subject to certain changes, reported PTI. It noted that a stock can be selected for additional surveillance measures if it falls under a specific basis such as high variation between the stock’s high and low prices and fluctuations in volumes in comparison to the monthly average. Further, such stocks attract higher margin requirements. 

Under the trade-for-trade (TFT) framework, the exchanges bar speculative trading and mandate the delivery of shares and payment of consideration amount. This framework shall be in conjunction with all other existing surveillance measures carried out by the exchanges time and again, both the exchanges said. 

The exchanges added that selecting securities under TFT would be done entirely on the market surveillance basis and should not be taken as an adverse action against the particular entity or firm. The new frameworks will be implemented by October 3. 

Markets have witnessed a craze for SME among the retail participants lately. The SME IPOs listed around September 11 have seen their price increase by three times from their IPO price, while those listed last week have doubled from their issue price, as reported by CNBC TV18. The markets have adopted these measures to keep a tab on the fanfare around SMEs and control speculative trading in the segment. 

Notably, the market regulator along with the exchanges have been working to put in place increased precautionary measures for surveillance in recent times. Earlier, the exchanges implemented a stricter surveillance mechanism for companies with a market capitalisation of under Rs 500 crore.