Additional Surveillance Measures

Posted by Flattrade August 16, 2021

Additional Surveillance Measures are set of rules introduced by SEBI along with the exchanges in India to prevent too much volatility in a security. The factor that are considered for shortlisting a security are price and volume variation, excessive concentration among few clients, variation between closing prices, market capitalization, delivery percentage, number of Unique PANs and price-to-earnings ratio

There are two types of ASM based on duration

  • Long-term ASM
  • Short-term ASM


Long-term ASM

The securities are placed in Long-term or Short-term ASM based on various factors.  The steps to place a security under Long-term ASM is slightly elaborate compared to the steps that needs to be followed to place it under Short-term ASM.

There are four criteria that needs to be satisfied for a security to be placed under Long-term ASM. Once the security comes under this segment, the security can be placed in any of the four stages – Stage I, Stage II, Stage III and Stage IV.

 The following are the various actions to be taken by clients based on different stages the stock is placed.

  • Stage I: Applicable margin shall be 100% from T+3 day for all clients.
  • Stage II: Reduction of price band to next lower level and applicable margin shall be 100% from T+3 day for all clients.
  • Stage III: Further reduction of price band to next lower level and applicable margin shall be 100% from T+3 day for all clients.
  • Stage IV: Settlement will be on Gross basis with 100% margin on all clients and 5% price band.


Review of stocks and Exit process from Long-term ASM list

Securities that have completed 90 calendar days in long term ASM list shall be eligible for exit from the list on a stage-by-stage process. The review of stocks will be on a weekly basis.

Stage-by-Stage Process

  • Stocks in stage I shall be eligible for exit from Long-term ASM framework subject to such stocks not meeting the entry criteria of long term ASM.
  • Stocks in Stage IV shall move to Stage III if such stocks do not meet the entry criteria for stage IV.
  • Stocks in Stage III shall move to Stage II if such stocks do not meet the entry criteria for stage III.
  • Stocks in Stage II shall move to Stage I if such stocks do not meet the entry criteria for stage II.


Short-term ASM

If a security is shortlisted and placed in Stage I of short-term ASM the following steps are taken

  1. A clarification will be requested from the company about any  corporate  announcement that  has  not  been  disseminated  to market. The clarification received will be circulated to the market.
  2. A Surveillance dashboard shall also be displayed on the Exchange website mentioning the  names  of  such  stocks  and  other  relevant  details  for  the  information  of  the

investors.  

  1. Margin  rate  for  the  shortlisted  stock  shall  be  50%  or  existing  margin,  whichever is higher, subject to maximum rate of margin capped at 100%.

If a security is short-listed and placed in Stage II of short-term ASM, then a margin  rate  for  the  shortlisted  stock  shall  be 100%.

Review of stocks and exit process from short-term ASM list

  • The stocks shall be retained in each stage as applicable for a minimum period of 5/15 trading days and shall be eligible for review from 6th / 16th Trading day onwards.
  • A stock will exit the Short-term ASM framework, if  a  stock  is  not  meeting  entry  criteria  on  the  review  date.
  • As long as a stock continues to meet the criteria for Short-term ASM without slipping into Long-term ASM list, the stock will continue to be subjected to the Stage II  ASM framework.
  • Once the stock  moves  to  Long-term  ASM  framework,  the  above  mentioned  Short-term ASM criteria shall not apply to the stock.


    Securities that are excluded from ASM list
  • Government owned companies that are categorized as Public Sector Enterprises and Public Sector Banks
  • Securities which are already under Graded Surveillance Measure (GSM)
  • Securities for which derivative products are already present
  • Securities already under Trade for Trade segment

To read more about Graded Surveillance Measures, click here

Tags: