What is Additional Surveillance Measures (ASM)
Additional Surveillance measure (ASM) is a regulatory mechanism introduced by the Securities Exchange Board Of India (SEBI) to control and monitor trading activities. ASM is designed to manage risk, improve the market integrity, and protect the investor. This framework includes several predefined criteria, such as price volatility, market capitalisation, and trading volumes. ASM majorly aims to maintain market stability by manipulating and regulating trading activities. Investors must know the stock’s ASM status before making valuable investment decisions.
What is ASM (Additional Surveillance Measures)?
SEBI introduces Additional Surveillance measures (ASM) to enhance the market integrity and protect the interests of the investors. Certain preventative surveillance measures like price distortion, transfer of securities, and periodic call auctions are done to trade for trade segments. SEBI listed many stocks under the ASM list; many of them are volatile and risky stocks.
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The stocks are moved to the ASM list based on NSE FAQ criteria. Stocks under ASM have been broadly divided into short-term ASM and long-term ASM stocks. To know which stocks are mentioned under the ASM list.
Types Of ASM List
Additional surveillance measures are of many types. Some of the common types are:
Prices bands
The price band ASM list helps to prevent high volatility and sudden price variations. This is done by placing price limits on the securities within a specified range.
Increased Margin Requirements
High-margin requirements are imposed on certain securities to reduce the risk of price manipulation and speculative activities.
Graded Surveillance measures (GSM)
In the GSM list, securities are classified as per the risk profile. This enables targeted monitoring and regulations.
Additional Disclosure Obligation
Some ASM securities must provide additional information and disclosures to investors so that transparency is maintained in the market.
Trading Restrictions
ASM restricts some securities trading activities to prevent excessive speculation. Restrictions like limitations on intraday trading and short selling help to maintain market stability.
What Surveillance actions apply to ASM stocks?
Following are the surveillance actions applicable to the stocks listed under ASM:-
- ASM-listed stocks are blocked at full value as margins. It means no intraday leverage will be offered for ASM stocks.
- There will be no impact on corporate actions if the stocks are listed under ASM. The shareholders will be given all the benefits of corporate actions, such as dividends, bonuses, stock splits, etc.
- The consent to place an order must be provided while placing the order to buy security listed under ASM.
- The stocks listed under the ASM list cannot be pledged by investors.
- If the investor’s pledged stock is moved to the ASM list, no collateral margins will be allowed on that stock. This is because 100% of margins will be levied according to the ASM.
- The full collateral value shown on the trading terminals will get reduced by the value received as collateral for that stock.
- If the stock is listed under ASM, the investors can either unpledged their stock or keep it pledged without collateral until it gets out of the list.
- The shortlisted securities for ASM will be closely monitored as per the pre-determined criteria. If the criteria get fulfilled, it will be moved into Trade for Trade segments.
- The ASM list is reviewed every two months by exchanges. The necessary changes are done according to the defined framework of ASM.
On what parameters are stock included in the ASM list?
The stocks in the ASM list are shortlisted as per the objective criteria of SEBI and exchanges. The decision to include a stock in this list is based on the following parameters:
- Low & high variation
- Client concentration
- Volume variation
- Number of unique PANs
- Price variation
- Delivery percentage
- Price-to-earning ratio
Bottom Line
ASM holds great importance in regulating and monitoring trading activities. High volatile and risky stocks are included in the ASM list. This listing indicates to the investors the potential risk associated with those stocks. This way, ASM helps to improve market integrity, manage risks, and save the interest of potential investors. When an investor comes across their stock in the ASM list, they should carefully evaluate the reason behind its listing and conduct thorough research on the stock.
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