Leading stock exchanges BSE and NSE have put in place a new framework to shortlist and review stocks under enhanced surveillance measures. Under the new guidelines, public sector enterprises and public sector banks will be excluded from the process of shortlisting of securities under additional surveillance measures (ASM), the exchanges said in separate circulars.The move comes within a month of markets regulator SEBI initiating a probe into alleged leak of 37 companies being brought under enhanced surveillance before stock exchanges made the list public. It was alleged that stocks that were to be included in additional surveillance measure were leaked to market operators before the official announcement made by stock exchanges. As per the circular, it has been decided that ASM parameters along with the thresholds will be disseminated by the stock exchanges.The decision was taken after a joint surveillance meeting of exchanges and SEBI last week.
The parameters for shortlisting securities under ASM are:
1) High low variation 2) Client concentration 3) Number of price band hits 4) Close to close price variation and price-earning (PE) ratio.
The exchanges said these criteria will be applicable for selection of stocks in the ASM framework. These include, high low price variation (based on corporate action adjusted prices) of a scrip is 200 per cent or more in last three months and concentration of top 25 clients in the last three months is 30 per cent or more. Besides, high-low price variation of a stock is 200 per cent or more during last three months and the number of price band hits (upper or lower) in the last three months is at least 30 per cent, then the company will come under enhanced surveillance.
Another criteria would be "close to close price variation in the last 30 trading days is 100 per cent or more and the concentration of top 25 clients in the last one month is 30 per cent or more".
Further, stock with a close to close price variation in 365 days is greater than 100 per cent and high-low variation of 200 per cent or more during the period, market cap of over Rs 500 crore and has high-low variation in 90 trading days of over 50 per cent, will also come under the enhanced surveillance.
After inclusion in the index, the exchanges said stock filter circuit of 5 per cent will be applicable from the date of inclusion of the stock in ASM, besides, requirement of 100 per cent margin to trade in such stock will become applicable from the next trade date after inclusion in the framework. After a month, scrips having PE ratio greater than 100 shall be placed in the trade for trade segment. Further, stocks in the ASM framework will be reviewed every two months. "Scrips having PE Ratio less than 10 (PE ratio is between 0 to 10) shall be moved out of ASM framework and close price shall become the base price for subsequent reviews," exchanges said in similar-worded circulars.
Further, stocks having PE ratio less than 2 times PE ratio of NSE 500 index will continue to remain in ASM, however such scrips will be moved out of trade for trade (restrictive trade) segment. According to exchanges, public sector enterprises and public sector banks; securities already under graded surveillance measure; stocks on which derivative products are available and scrips already under trade for trade will be excluded from the process of shortlisting under ASM.