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.
These pro-active measures are taken based on the analysis/ processing of alerts generated based on various parameters and other inputs like news, company results, etc. The broad parameters considered for generation and analysis of alerts are price movement, top 'n' turnover, scrips traded infrequently, scrips hitting new high/ low, scrips picked up for rumour verification, etc.
The scrips picked up based on the preliminary analysis/ enquiries are forwarded to the Investigation cell for further examination/ investigation.
The detail rationale of the surveillance actions taken by BSE from time to time are as follows :
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 illquid 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 10% dynamic circuit filter on these scrips to avoid punching
errors, if any.
A list of equity stock on which dynamic circuit filter applied is attached.
Circuit Filter of 20 % is applicable on other scrips which are not included in
the above-mentioned category.
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 transfers various scrips for settlement on a Trade-to-Trade basis. The said action is reviewed at periodic intervels (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 transfer to Trade for Trade segment.
The Fortnightly and Quarterly review calendar for the year 2013 is attached
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 is given below. The securities satisfying all the Criteria I, II and III shall be transferred to Trade for Trade segment.
Dropping of Scrips
- Criteria I
- 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
- Criteria II
- 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
- Criteria III
- Market Capitalization
- Market Capitalization of Rs.500 crore or lower as per last Quarterly review.
Indicative relevant period:
- 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.
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.
Dropping Criteria and Note:
Additionally, SEBI has vide circular bearing no SEBI/Cir/ISD/1/2010 dated Sep 02 2010 laid down further guidelines for shifting of a security to trade for trade segment, which are as under:
- The securities of all companies shall be traded in the normal segment of the exchange if and only if, the company has achieved at least 50% of non-promoters holding in dematerialized form by October 31st 2010 ( with the exception of the government holding in non promoter category).
- In all cases, wherein based on the latest available quarterly shareholding pattern, the companies do not satisfy above criteria, the trading in such scrips shall take place in Trade for Trade segment (TFT segment) with effect from the time schedule specified above.
- In addition to above measures, in the following cases (except for the original scrips, on which derivatives products are available or included in indices on which derivatives products are available) the trading shall take place in TFT segment for first 10 trading days with applicable price band while keeping the price band open on the first day of trading.
- Merger, demerger, amalgamation, capital reduction/consolidation, scheme of arrangement, in terms of the Companies Act and/or as sanctioned by the Courts, in cases of rehabilitation packages approved by the Board of Industrial and Financial reconstruction under Sick Industrial Companies Act and in cases of Corporate Debt Restructuring (CDR) packages by the CDR Cell of the RBI.
- Securities that are being admitted to trading from another exchange by way of direct listing/MOU/securities admitted for trading under permitted category,
- Where suspension of trading is being revoked after more than one year.
Besides, securities which have not established connectivity with both the depositories as per SEBI directive are available for trading in Trade for Trade segment under T group.
The Surveillance Department liaises with the Compliance Officers of the listed companies to obtain their comments on various price-sensitive corporate news items appearing in the media. Comments received from the companies are disseminated to the market by way of BOLT Ticker and/ or Notices on the BSE website. If the company denies the news / information, a letter is sent to the company asking them to take up the matter with the concerned media.