The Bombay Stock Exchange (BSE) on Wednesday clarified on the new additional surveillance rules that intends to curb excessive price movement in securities listed on BSE trading platform. Midcap and smallcap stocks made a smart recovery post the clarification after trading with cuts from the past two sessions.
BSE in a circular on Wednesday that in partial modification and supersession of the Exchange circular dated August 09, 2021, the following clarifications are being provided to simplify the understanding and implementation of the framework that the said framework is applicable to BSE Exclusive securities in groups viz. X, XT, Z, ZP, ZY, Y.
Also, securities should have a price of Rs 10 and more (as on review date) and the market capitalization the security should be less then Rs 1,000 crore.
''As per the additional clarification provided by BSE (restrictions applicable only on securities priced more than 20 rupees & market cap of less than 1000 cr), these restrictions will affect only a handful of stocks and hence the knee jerk reaction that the market has seen in the small & mid cap stocks in unwarranted,'''' Divam Sharma, Co-founder of Green Portfolio, SEBI registered Portfolio Management Services said.
These price restrictions will discourage price maniuplation leading to less volatility. Retail participation has increased significantly in the last 1 year and it is important that they be protected from such manipulations. The restriction limits seem reasonable and any good company with long term wealth generating potential will not be significantly affected by them, Sharma added.
Exchanges in consultation with SEBI, have introduced various surveillance measures such as Graded Surveillance Measures (GSM), Additional Surveillance Measure (LTASM), Short-Term Additional Surveillance Measure (ST-ASM), Trade for Trade (TT) etc.
''''In continuation with our endeavor to maintain market integrity and curb excessive price movement in securities listed exclusively on BSE Trading Platform, a need has been felt to further strengthen the extant surveillance measures. Accordingly, a new surveillance framework viz. Add-on Price Band Framework is being introduced by the Exchange for securities listed exclusively on BSE Trading Platform,'''' the August 9 circular had said.
Accordingly, the shortlisted securities, shall have 6 monthly, 1 yearly, 2 yearly and 3 yearly price band in place of weekly, monthly, quarterly price band.
The August 9 circular did not mention the stock groups after which the broader market witnessed a sharp sell-off, therefore, to clarify the same, BSE issued a new circular today in which it mentioned the groups for which the framework is applicable.
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