Price Monitoring Cell

The function of this Cell is to detect potential market abuses at a nascent stage to reduce the ability of the market participants to unduly influence the price of the scrips traded at BSE by taking surveillance actions like reduction of circuit filters, imposition of special margin, transferring scrips on a trade-to-trade settlement basis, suspension of scrips/ members, etc.

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• Special Margins
  
  

  Special margins are imposed on such scrips which have witnessed an abnormal price/ volume movement. Special margin is imposed by BSE @ 25% or 50% or 75% as the case may be, on the client wise net outstanding purchase or sale position (or on both side).

• Reduction of Circuit Filters
  
  

  The circuit filters are reduced in case of illiquid scrips or as a price containment measures. The circuit filters are reduced to 10 % or 5 % or 2 % as the case may be, based on the criteria decided by the Surveillance Department. No circuit filters are applicable on scrips on which derivative products are available and scrips which are liquid and included in indices on which derivative products are available. However, BSE imposes dummy circuit filter on these scrips to avoid punching errors, if any.

  Circuit Filter of 20 % is applicable on other scrips which are not included in the above-mentioned category.

• Trade-to-Trade
  
  

  If a scrip is shifted for settlement on Trade-to-Trade basis, selling/ buying of shares in that scrip results into giving/ taking delivery of shares at the gross level and no intra day netting off/ square off facility is permitted. The scrips which form part of the 'Z group' are compulsorily settled on a trade-to-trade basis.

  As a part of Surveillance measure the Exchange shift scrips for settlement on a Trade-to-Trade (T2T) basis. The said action is reviewed at periodic intervals (fortnightly & Quarterly) based on market capitalization, price earnings ratio, price variation vis-à-vis the market movement, volatility, volume variation, client concentration and number of non promoter shareholders etc. The criteria for shifting scrips to/fro for settlement on T2T basis are decided jointly by the stock exchanges in consultation with SEBI and reviewed periodically. Scrips on which derivatives products are available or scrips included in indices on which derivatives products are available are not considered for transferred to Trade for Trade segment.

  In order to bring greater transparency and to eliminate various allegations about manner of shifting of scrips to /from the T2T segment criteria for shifting scrips to/fro Trade-for-Trade segment is given below:

  Fortnightly Review Criteria

  The detailed fortnightly review criteria for shifting of scrip to T2T segment:

  • PE Multiple Criteria
  
  
  
  • If SENSEX PE Multiple on the relevant date is in the range of 15-20 then scrips having PE greater than 30 will be considered.
    
    
  • If SENSEX PE Multiple on the relevant date is greater than 20 or less than 15 than difference will be rounded off to nearest number and same will be added subtracted from 30. However, minimum base of PE Multiple shall be 25. Accordingly scrips having PE greater than this bench mark will be considered.
  • All scrips having negative PE shall be considered. AND
  • Price Variation Criteria
  
  
  All scrips where the price variation is in positive direction as below will be considered:
  
  
  • 20% plus Sensex variation (Sensex Variation will be calculated on close to close basis). In case SENSEX variation is negative it shall be 20% minus SENSEX variation as Price Variation Benchmark, subject to a minimum of 10%. AND
  • Market Capitalization
  
  
  
  • Market Capitalization of Rs.500 crore or lower as per last Quarterly review.

• Dropping of Scrips



• Newly listed scrips (IPO) and the securities which are made available for trading in Trade for Trade segment for the first 10 trading days with applicable price band, while keeping the price band open on the first day of trading as per SEBI circular bearing no SEBI/Cir/ISD/1/2010 dated September 2, 2010 shall be dropped till the time they declare their first Quarterly results.



• Scrips transferred out of T2T settlement to Rolling settlement as per quarterly T2T Review Exercise will not be considered in immediate following fortnightly T2T review for shifting it back to T2T.

Note:

Indicative relevant period:

17 days prior to the date when the T2T activity is initiated by the Exchange including Saturday, Sunday and Trading Holidays within that period.

Quarterly Review Criteria:

The securities satisfying any of the following criteria A, B, C or D shall be transferred to Trade for Trade segment.

• Category A


OR


• Category B


OR


• Category C


OR


• Category D
  

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Investigations Cell

The Investigation Cell conducts following types of analysis of suspected market irregularities in a systematic and logical manner and then take appropriate and timely actions.

• Snap Investigations
  
  

  Potential cases of market irregularities are taken up for further analysis. A preliminary analysis of the trading pattern and corporate developments in the scrip is done to ascertain whether the price or volume variation observed requires further detailed analysis.

• Examinations
  
  

  Examinations are a more detailed form of preliminary analysis of the trading pattern and various developments in the company wherein a report is prepared. These examinations are conducted usually on receiving a reference from SEBI or any other department of BSE or is based on an investor complaint.

• Investigations
  
  

  These are full-fledged and detailed investigations wherein a complete analysis is conducted in a systematic and logical manner based on the information available with BSE and information sought/received from the Members, companies, depositories and various other sources. These investigations are conducted to establish the manipulation that was suspected in the preliminary analysis.

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Position Monitoring

The Surveillance Department closely monitors the outstanding exposure of Members on a daily basis. For this purpose, it has developed various market monitoring reports. The reports are scrutinized to ascertain whether there is excessive purchase or sale position build up compared to the normal business of the Member, whether there are concentrated purchases or sales, or whether the purchases have been made by inactive or financially weak Members. Even the quality of scrips is considered to assess the quality of exposure. Based on an analysis of the above factors and the margins already paid and the capital deposited by the Member, early pay-in calls are made, if required. Some Members are even advised to reduce their outstanding exposure in the market. Trading restrictions are placed on financially weak Members as and when deemed fit after taking into consideration their past track record. The Department, as such, executes an important risk management function to avert possible payment default of Members by taking timely and corrective measures.

The earlier Circuit Filters at individual scrip level used to restrict the movements of indices as well. Now, there are no Circuit Filters on the scrips forming part of popular indices like SENSEX. In order to contain huge price movements of index scrips, SEBI has mandated that Market Wide Circuit Breakers (MWCB) which at 10-15-20% of the movements in either BSE SENSEX or NSE Nifty whichever is breached earlier would be applicable. This would provide a cooling period to the market participants and to assimilate and re-act to the market movements.

The trading halt on all stock exchanges would take place as under;

- In case of a 10% movement in either index, there will be a 1-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1 p.m. but before 2:30 p.m., there will be a trading halt for 1/2 hour. In case the movement takes place at or after 2:30 p.m., there will be no trading halt at the 10% level and the market will continue trading.

- In case of a 15% movement in either index, there will be a 2-hour market halt if the movement takes place before 1:00 p.m. If the 15% trigger is reached on or after 1:00 p.m. but before 2 p.m., there will be a trading halt for 1 hour. If the 15% trigger is reached on or after 2:00 p.m., the trading will halt for the remainder of the day.

- In case of a 20% movement in either index, the trading will halt for the remainder of the day.

The above percentage would be translated into absolute points of the Index variation on a quarterly basis. These absolute points are revised at the end of each quarter

The Market Wide Circuit Breakers at a national level have been introduced in the Indian markets for the first time. This is on the lines of the system prevailing in the US markets.

Individual Scrip Circuit Filters

Circuit Filter of 20% is applicable on all scrips except the scrips on which derivative products are available and are part of indices on which derivative products are available. However, BSE imposes dummy circuit filter on these scrips to avoid punching errors, if any.

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