ASM in Stock Market – Understanding the term Additional Surveillance Measure (ASM) & FAQ

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3 years ago

Additional Surveillance Measure (ASM)

Securities and Exchange Board of India (SEBI) and Exchanges in order to enhance market integrity and safeguard interest of investors, have been introducing various enhanced pre-emptive surveillance measures such as reduction in price band, periodic call auction and transfer of securities to Trade for Trade segment from time to time.

In continuation to various surveillance measures already implemented, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the aforesaid measures there shall be Additional Surveillance Measures (ASM) on securities with surveillance concerns based on objective parameters viz. Price / Volume variation, Volatility etc.

The shortlisting of securities for placing in ASM is based on an objective criterion as jointly decided by SEBI and Exchanges covering the following parameters:

High Low Variation
Client Concentration
Close to Close Price Variation
Market Capitalization
Volume Variation
Delivery Percentage
No. of Unique PANs
PE

Frequently Asked Questions (FAQs)

1. What is the purpose for introduction of ASM framework?

In order to enhance market integrity and safeguard interest of investors, Securities and Exchange Board of India (SEBI) and Exchanges, have been introducing various enhanced surveillance measures such as Graded Surveillance Measure (GSM), reduction in price band, periodic call auction and transfer of securities to Trade for Trade segment from time to time.

The main objective of these measures is to –

Alert and advice investors to be extra cautious while dealing in these securities

Advise market participants to carry out necessary due diligence while dealing in these securities.

In continuation to various surveillance measures already implemented, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the aforesaid measures there shall be Additional Surveillance Measure (ASM) on securities with surveillance concerns based on objective parameters viz. Price variation, Volatility etc.

2. What are the criteria for shortlisting scripts under ASM framework and what are the applicable surveillance actions on the shortlisted scripts?

The shortlisting of securities for placing in ASM framework is based on objective criteria as jointly decided by SEBI and Exchanges covering the following market based dynamic parameters:

High Low Variation

Client Concentration

Close to Close Price Variation

Market Capitalization

Volume Variation

Delivery Percentage

No. of Unique PANs

The criteria for shortlisting & review of securities under Long-term and Short-term ASM Frameworks is as given below.

Section I: Long-term Additional Surveillance Measure (Long-term ASM)

A)The following SEVEN criteria shall be made applicable for selection of stocks in the Long Term ASM Framework.

High–Low Price Variation (based on corporate action adjusted prices) in 3 months > (150% + Beta (β) of the stock * Nifty 50 variation)

AND

2. Concentration of Top 25 clients ≥ 25% of combined trading volume of NSE & BSE in the stock in last 30 days.

AND

3. Market Capitalisation > Rs. 100 Crore as on review date.

Close–to–Close Price Variation (based on corporate action adjusted prices) in the last 60 trading days > (100% + Beta (β) of the stock * Nifty 50 variation).

AND

Concentration of Top 25 clients ≥ 25% of combined trading volume of NSE & BSE in the stock in last 30 days.

AND

Market Capitalisation > Rs. 100 Crore as on review date.

Close–to–Close Price Variation (based on corporate action adjusted prices) in 365 days > (100% + Beta (β) of the stock * Nifty 50 variation)

AND

High–Low Price Variation (based on corporate action adjusted prices) in 365 days

> (200% + Beta (β) of the stock * Nifty 50 variation)

AND

Market Capitalisation > Rs. 500 Crore as on review date

AND

4. Concentration of Top 25 clients ≥ 25% of combined trading volume of NSE & BSE in the stock in last 30 days4.Average daily Volume in a month is ≥ 10,000 shares & monthly volume variation in a stock is > 500% of Average daily volumes in preceding 3 months at both Exchanges (NSE and BSE)

AND

Concentration of Top 25 clients ≥ 25% of combined trading volume of NSE & BSE in the stock in last 30 days.

AND

Average Delivery % is less than 50% in last 3 months

AND

Market Capitalisation > Rs. 500 Crore as on review date

AND

Close–to–Close price variation (based on corporate action adjusted prices) in last one month ≥ (50% + Beta (β) of the stock * Nifty 50 variation)

Exemption: Bulk / Block (maximum of buy /sell value), i.e., Average Volume of Bulk or Block Quantity / Average Volume of the Security greater than 50%.

Close to Close price variation > 25% + (Beta * Nifty 50 Variation) in a month

AND

PE negative OR > 2 times of PE of Nifty 50

AND

Market Capitalisation < Rs. 500 Crores as on review date.

Close-to-Close price variation of the SME stock ≥ ±25% + (Beta (β) of the stock * NIFTY SME EMERGE Index Variation) in 15 days

Close-to-Close price variation of the SME stock ≥ ±50% + (Beta (β) of the stock * NIFTY SME EMERGE Index Variation) in 30 days

OR

5.Close-to-Close price variation of the SME stock ≥ ±90% + (Beta (β) of the stock * NIFTY SME EMERGE Index Variation) in 3 months

AND

6.PE of the stock is negative OR PE of the stock ≥ 2 times the PE of NIFTY SME EMERGE Index.

Note:

For stagewise surveillance action on SME stock after inclusion in Long Term ASM criteria 6:

Price variation > (+ 25% + Beta (β) of the SME stock * NIFTY SME EMERGE Index Variation) shall be considered.
Concentration of Top 25 clients excluding market makers shall be considered.

7)Scrips with price band of ±10%, ±5%, ±2%

AND

Close-to-Close Price Variation (based on corporate action adjusted prices) in 365 days ≥ (200% + Beta (β) of the stock * Nifty 50 variation)

AND

High-Low Price Variation (based on corporate action adjusted prices) in 365 days

≥ (300% + Beta (β) of the stock * Nifty 50 variation)

AND

Market Capitalisation > Rs. 1000 Crores as on review date

AND

Concentration of Top 25 clients ≥ 25% of combined trading volume of NSE & BSE in the stock in last 30 days

Action on the stocks shortlisted as per Criteria 7:

i. The shortlisted scripts shall be placed directly in Stage IV of Long Term ASM w.e.f. beginning of T+3 days (T day being the day on which scrip was shortlisted).

ii. The shortlisted scripts shall be retained in Stage IV for a minimum period of 90 calendar days.

iii. Post completion of 90 calendar days, such scripts shall be subjected to stage wise review (that is at present undertaken on weekly basis by the Stock Exchanges).

Securities completing 90 calendar days in Long-term ASM Framework would be eligible for exit from the framework subject to stage-wise exit.

In addition to the above, the stocks satisfying the below criteria after inclusion / stage – wise movement under the Long Term ASM shall be placed in Stage IV of Long Term ASM and shall be retained in Stage IV till such time the stocks satisfy the criteria:

High-Low Price Variation (based on corporate action adjusted prices)in 6 months ≥

(200% + Beta (β) of the stock * Nifty variation)

AND

Non-Promoter holding in the stock < 10%

Note: The Beta (β) factor shall be applicable only in case of positive index variation. The securities satisfying any of the above six criteria shall be shortlisted under Long-term ASM.

The following securities shall be excluded from the process of shortlisting of securities under ASM:

Public Sector Enterprises and Public Sector Banks
Securities already under Graded Surveillance Measure (GSM)
Securities on which derivative products are available
Securities already under Trade for Trade

B)The applicable surveillance action on shortlisted scrip’s based on the above criteria shall be as follows:

Stage wise Surveillance action after inclusion in Long Term ASM:

Stage	Conditions for Entry	Action
I	Identification of securities based on entry criteria	Applicable margin shall be 100% from T+3 day
II	Stocks which are already in Stage I of Long term ASM, satisfying the following conditions in 5 consecutive trading days: Close–to–Close Variation (based on corporate action adjusted prices)≥ (25% + Beta (β) of the stock * Nifty 50 variation) AND Concentration of Top 25 clients ≥ 30% of combined trading volume of NSE & BSE in the stock in last 30 days.	Reduction of price band to next lower level and applicable margin shall be 100% from T+3 day
III	Stocks which are already in Stage II of Long term ASM, satisfying the following conditions in 5 consecutive trading days: Close–to–Close Variation ≥ (25% + Beta (β) of the stock * Nifty 50 variation) AND Concentration of Top 25 clients account ≥ 30% of combined trading volume of NSE & BSE in the stock in last 30 days	Further reduction of price band to next lower level and applicable margin shall be 100% from T+3 day
IV	Stocks which are already in Stage III of Long term ASM, satisfying the following conditions in 5 consecutive trading days: Close–to–Close Variation (based on corporate action adjusted prices)≥ (25% + Beta (β) of the stock * Nifty 50 variation)	Settlement shall be on Gross basis with 100% margin for all clients and 5% price band.
Stage	Conditions for Entry	Action
	AND Concentration of Top 25 clients ≥ 30% of combined trading volume of NSE & BSE in the stock in last 30 days

Review Period and Exit

Securities completing 90 calendar days in Long-term ASM Framework would be eligible for exit from the framework subject to stage-wise exit as mentioned below.
The stage-wise review of stocks shall be on a weekly basis.
Exit for stocks shall be in stages as under:

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

Section II: Short-term Additional Surveillance Measure (Short-term ASM)

The following criteria shall be made applicable for selection of stocks in the Short Term ASM Framework:

a)Stage I

Criteria for Identification of stocks:

Stocks witnessing Close-to-Close Price Variation ≥ (± 25% + Beta (β) of the stock x Nifty 50 variation) in 5 trading days. AND Concentration of Top 25 clients ≥ 30% of combined trading volume of		Stocks witnessing Close-to-Close Price Variation ≥ (± 40% + Beta (β) of the stock x Nifty 50 variation) in 15 trading days. AND Concentration of Top 25 clients account ≥ 30% of combined trading
NSE & BSE in the stock in 5 trading days.		volume of NSE & BSE in the stock in 15 trading days.

OR

For Stocks with a market capitalization more than INR 100 crore and less than or equal to INR 500 crore		For Stocks with a market capitalization greater than INR 500 crore
High Low Variation on a one month basis greater than 75% AND Average Unique PANs trading in the scrip in last one month < 100	High Low Variation on a one month basis greater than 75% AND Average Unique PANs trading in the scrip in last one month < 200

Stocks identified as per any of the above four criteria in any of the Exchanges shall be shortlisted under the framework.

Action on the shortlisted stocks:

On identification of above stocks, clarification shall be sought from the company about any corporate announcement, if any that has not been disseminated to market. The clarification, so received shall be disseminated to the market.

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

b)Stage II

Criteria:

Stocks witnessing Close-to-Close Price Variation ≥ (± 25% + Beta (β) of the stock x Nifty 50 variation) in any 5 consecutive trading days during the 15 days following the inclusion in Stage I. AND Concentration of Top 25 clients ≥ 30% of combined trading volume of NSE &	OR	Stocks witnessing Close-to-Close Price Variation ≥ (± 25% + Beta (β) of the stock x Nifty 50 variation) in any 15 consecutive trading days during the 45 days following the inclusion in Stage I. AND Concentration of Top 25 clients ≥ 30% of combined trading volume of NSE &
BSE in the stock during the above mentioned 5 days period.		BSE in the stock during the above mentioned 15 days period.

Action on the shortlisted stocks:

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

c) Exit Criteria

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 6^th/ 16^thTrading day onwards.

Accordingly, if a stock is not meeting entry criteria on the review date, it would be moved out of Short-term ASM framework.
As long as a stock continues to meet the criteria for Short-term ASM without attracting the criteria for Long-term ASM, the stock will continue to be subjected to the Stage II ASM framework.
If the stock moves to Long-term ASM framework, the above mentioned Short-term ASM provisions shall not apply to the stock.

The aforementioned criteria are dynamic in nature and subject to change from time to time.

3.When has the ASM framework come into force?

The monitoring of securities under ASM framework has come into force with effect from March 26, 2018. The Exchange, in coordination with other Exchanges, has issued circular having download reference numbers : NSE/SURV/37253 & NSE/SURV/37262 on March 21, 2018 and March 22, 2018 respectively informing the market participants about introduction of ASM framework along with the first list of shortlisted securities qualifying for application of ASM.

The details of the current ASM framework in force has been disseminated to the market vide the below mentioned Exchange circulars:

Circular No.	Date of Circular
NSE/SURV/39265	October 27, 2018
NSE/SURV/39932	January 11, 2019
NSE/SURV/41665	July 19, 2019
NSE/SURV/45111	July 22, 2020
NSE/SURV/46557	December 04, 2020
NSE/SURV/48506	June 04, 2021

4. Should shortlisting under ASM be construed as an adverse action against the concerned company / entity?

The shortlisting of securities under ASM is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company / entity

5.Some of the securities which have been identified under ASM are already under various surveillance actions mentioned in the ASM framework. What does this mean?

As stated, ASM framework shall work in addition to existing actions undertaken by the Exchange on the company’s securities. In case the securities are already attracting any action mentioned in ASM framework, then such action shall continue to work in conjunction with appropriate action under ASM framework.

6. Where do I get the complete list of securities under ASM?

A file (List_of_securities_shortlisted_under_ASM.csv) containing securities under ASM is available on NSE website at the following link:

https://www.nseindia.com/regulations/additional-surveillance-measure

Market Participants are requested to refer the latest circulars issued by the Exchange with respect to Applicability of Additional Surveillance Measure (ASM) and Applicability of Short-Term Additional Surveillance Measure (ST-ASM). The circulars are available on NSE website at the following link:

https://www.nseindia.com/resources/exchange-communication-circulars

7. How will the market participants be made aware of various Additional Surveillance Measures undertaken by the exchanges on securities on short notice?

The Exchange has already published various circulars giving information to market participants on ASM framework and the consolidated list of companies. Going forward as well, the Exchange shall continue to publish such circulars. All surveillance actions shall be triggered based on certain criteria and shall be made effective, in a coordinated manner across the Exchanges, with a very short notice issued after market hours typically one trading day before the effective date.

Further, while placing an order on a security which is under Graded Surveillance Measure (GSM)

/ Additional Surveillance Measure (ASM) / Insolvency Resolution Process (IRP) as per Insolvency and Bankruptcy Code (IBC) an alert message “ Security is under Surveillance Measure / Unsolicited SMS (<relevant surveillance Indicator>), Would you like to continue? ” shall be displayed on NEAT/NEAT+.

For ready reference, the consolidated list of surveillance indicators assigned to securities under GSM / ASM / ASM-IBC / Unsolicited SMS is as under:

Surveillance Indicator	Description
99	Shortlisted under Graded Surveillance Measure
1	Graded Surveillance Measure – Stage I
2	Graded Surveillance Measure – Stage II
3	Graded Surveillance Measure – Stage III
4	Graded Surveillance Measure – Stage IV
6	Graded Surveillance Measure – Stage VI
10	Additional Surveillance Measure for Companies relating to the Insolvency Resolution Process (IRP) as per Insolvency and Bankruptcy Code (IBC)
11	Short Term Additional Surveillance Measure – Stage I
12	Short Term Additional Surveillance Measure – Stage II
13	Long Term Additional Surveillance Measure – Stage I
14	Long Term Additional Surveillance Measure – Stage II
15	Long Term Additional Surveillance Measure – Stage III
16	Long Term Additional Surveillance Measure – Stage IV
30	Information list (unsolicited SMS)
31	Current watch list (unsolicited SMS)

8.Besides the actions stated in ASM framework, can there be any other regulatory action against the companies identified therein?

Surveillance actions under ASM framework are without prejudice to the right of Exchanges and SEBI to take any other surveillance measures, in any manner, on case to case basis or holistically depending upon the situation and circumstances as may be warranted.

Exchanges shall also be monitoring the PE ratios of stocks and in case of stocks having relatively / abnormally high valuations compared to sectoral/broad indices, additional surveillance measure in conjunction with Short-term / Long-term ASM shall be imposed.

9. How will the Trading Member be intimated about increase in Margin?

The margin rate shall be intimated in the VAR Begin of Day file published on the website for the day it is applicable. The files are available on our website at the following link:

https://www.nseindia.com/all-reports