BSE and NSE Introduce Measures to Curb Speculative Trading in SME Stocks

BSE and NSE Introduce Measures to Curb Speculative Trading in SME Stocks. Image/Mint

VoM News Desk | September 26, 2023 | 10:32 AM IST | Breaking News | Follow on Google News

BSE and NSE Introduce Measures to Curb Speculative Trading in SME Stocks

In a concerted effort to combat speculative trading in the Small and Medium Enterprises (SME) segment, both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) jointly announced significant changes on Monday. SME stocks will now be subjected to the Additional Surveillance Measures (ASM) framework and trade-to-trade settlement, aiming to promote responsible and stable trading practices.

Key Decisions by Regulators and Exchanges

These pivotal decisions were reached during a joint surveillance meeting involving the stock exchanges and the market regulator, the Securities and Exchange Board of India (SEBI). The outcome of the meeting was communicated through circulars issued by both the BSE and NSE. Under the revised framework, short-term ASM and trade-for-trade mechanisms will be applied to SME stocks, albeit with specific modifications.

Criteria for Inclusion in ASM

Stocks can be placed under the Additional Surveillance Measures (ASM) framework if they meet certain criteria, including exhibiting a significant variation between high and low prices and demonstrating notable variations in trading volumes when compared to the monthly average. Such shares will also necessitate higher margin requirements to mitigate risks associated with speculative trading.

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The Trade-for-Trade (TFT) Framework

The introduction of the trade-for-trade (TFT) framework for SME stocks signifies a stringent approach to trading. Under this framework, speculative trading is prohibited, and the mandatory delivery of shares and payment of the consideration amount is enforced. This measure aims to bolster transparency and ensure that trading is conducted with genuine intent.

Enhancing Market Integrity and Investor Protection

The decision to extend these enhanced surveillance measures to SME stocks underscores the commitment of SEBI and the stock exchanges to enhance market integrity and safeguard the interests of investors. Over time, various pre-emptive surveillance measures have been introduced to maintain market stability and protect market participants.

Implementation and Availability

Market participants and stakeholders should note that these new frameworks will be implemented by October 3. Importantly, the shortlisting of securities under the TFT framework should not be interpreted as an adverse action against the concerned company or entity; it is primarily a measure taken to enhance market surveillance.

Strengthening Market Regulation

This initiative aligns with the broader goals of strengthening market regulation and ensuring that trading practices are conducted responsibly and ethically. By introducing these measures, the exchanges and SEBI aim to create an environment that fosters fair and secure trading, ultimately benefiting all participants in the Indian stock market.

VoM News Desk

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