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 Securities traded at BSE by taking surveillance actions like reduction of circuit filters, imposition of special margin, transferring Securities on a trade-to-trade settlement basis, suspension of Securities/ 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, Securities traded infrequently, Securities hitting new high/ low, Securities picked up for rumour verification, etc.

The Securities 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

Special margins are imposed on such Securities 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 Securities 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 Securities on which derivative products are available. However, BSE imposes 10% dynamic circuit filter on these Securities to avoid punching errors, if any.

A list of equity stock on which dynamic circuit filter applied is attached.

Trade-to-Trade

As a part of Surveillance measure the Exchange transfers various Securities for settlement on a Trade-to-Trade basis. The said action is reviewed on periodic basis 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 Securities to/from for settlement on T2T basis are decided jointly by the stock exchanges in consultation with SEBI and reviewed periodically.

Securities on which derivatives products are available are not considered for transfer to Trade for Trade segment.

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

The process of identifying the Securities for moving to Trade to Trade will be done on fortnightly basis and identifying Securities for shifting to/from Trade for Trade segment on quarterly basis based on the following criteria ;

Fortnightly Review Criteria

The detailed fortnightly review criteria for shifting of securities to Trade for Trade segment is given below. The securities satisfying all the Criteria I, II and III shall be transferred to Trade for Trade segment.

Criteria I

• PE Multiple Criteria
  
  • If SENSEX PE Multiple on the relevant date is in the range of 15-20 then securities 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 securities having PE greater than this bench mark will be considered.
  • Methodology of Calculation of Securities PE
  • For the purpose of calculation of PE, summation of quarterly profit figures of latest four trailing quarters available with the Exchange out of last five financial quarters will be considered. If less than four trailing quarterly results are available then the profits shall be annualized for PE calculation.
  • All securities having PE <= 0 shall be considered.

AND

Criteria II

• Price Variation Criteria
  All securities where the price variation is in positive direction as below will be considered:
• 25% plus S & P BSE 500 / Sectorial Index variation subject to a minimum of 10%. (*In case a particular Sectorial Index is available only on one exchange the other exchange shall also use the same to compare price variation in securities of the concerned sector for the purpose of shifting to Trade for Trade segment).

AND

Criteria III

• Market Capitalization
  Market Capitalization of Rs.500 crore or lower as on relevant date.

Exemptions

• Securities with Dynamic Price Bands.
• Newly listed securities (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.
• Securities 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 Trade to Trade.

Quarterly Review for shifting securities to / from Trade to Trade:

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

Category A:

• PE Criteria
  • If S& P BSE SENSEX PE Multiple on the relevant date is in the range of 15-20 then Securities having PE greater than 30 will be considered.
  • If S & P BSE 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 Securities having PE greater than this bench mark will be considered.
  • Methodology of Calculation of Securities PE For the purpose of calculation of PE, summation of quarterly profit figures of latest four trailing quarters available with the Exchange out of last five financial quarters will be considered. If less than four trailing quarterly results are available then the profits shall be annualized for PE calculation.
  • All scrips having PE <= 0 shall be considered.
  AND
  
• Volatility
  Volatility greater than three times S& P BSE SENSEX volatility over a period of six fortnights.
  
AND
• Price Variation Criteria
  All Securities where the price variation is in positive direction as below will be considered:
  • 25% plus S& P BSE 500 / Sectorial Index variation subject to a minimum of 10%. (*In case a particular Sectorial Index is available only on one exchange the other exchange shall also use the same to compare price variation in securities of the concerned sector for the purpose of shifting to Trade for Trade segment)

OR

Category B:

• PE Criteria
  • If S&P BSE SENSEX PE on the relevant date is in the range of 15-20 then Securities having PE multiple greater than 0 but <= 30 will be considered.
  • If S& P BSE 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 Securities having PE greater 0 but less than this bench mark will be considered.
  • Methodology of Calculation of Securities PE.For the purpose of calculation of PE, summation of quarterly profit figures of latest four trailing quarters available with the Exchange out of last five financial quarters will be considered. If less than four trailing quarterly results are available then the profits shall be annualized for PE calculation.
  AND
  
• Volatility
  Volatility greater than three times S& P BSE SENSEX volatility over a period of six fortnights.
  
AND
• Price Variation Criteria
  All Securities where the price variation is in positive direction as below will be considered:
  • 50% +/- S& P BSE 500 / Sectorial Index variation.
OR

Category C:

• Market Capitalization
  
  • Criteria C shall be applicable to Securities having market capitalization less than 2 times of the market capitalization arrived at for the review.
    
  • Market capitalization threshold shall be linked to the S&P BSE SENSEX movement between December 1, 2003 (taking base as Rs. 200 Cr on Dec 01, 2003) and present quarterly relevant date, after rounding off to the nearest Rs. 50 Cr of higher of S&P BSE SENSEX movement.
  • Volume Variation
    Average daily volume variation two fortnights over a previous two fortnight greater than 200% + Average volume variation of S & P BSE 500 constituents. (Computed as average of average volume variation across the constituents as on relevant date, rounded off to the nearest 5%), subject to minimum of 200%. (Average daily volume in the recent month being more than 1000 shares).
    AND
  • Concentration Criteria
    
    • Concentration (Gross Purchase plus Gross Sales) of top 10 Clients on the basis of PAN Number during the month greater than 25%.
    AND
  • Price Variation Criteria
    All Securities where the price variation is in positive direction as below will be considered:
    
    • 25% plus S& P BSE 500 / Sectorial Index variation subject to a minimum of 10%.

OR

Category D:

• Number of non-promoter shareholders less than 500 as per the latest shareholding pattern available with the Exchange.

(*In case a particular Sectoral Index is available only on one exchange the other exchange shall also use the same to compare price variation in securities of the concerned sector for the purpose of shifting to Trade for Trade segment).

Dropping Criteria:

To the securities selected according to the above four Category, the following dropping criteria will be applied if they has a Market Capitalization of more than Rs.500 Crs on the relevant date :

• The companies having record of paying dividends in last two years out of three years (in case a company has issued bonus shares (and no dividend) ) shall be excluded. As companies can declare results till six months from the date of year ending, any declaration regarding dividend payment received by the Exchange will be considered as dividend paid.OR
  
• Securities having Institutional holding of more than 20%. OR
• Securities with Dynamic Price Bands will be excluded.OR
• Initial Public offers - IPOs having a market capitalization of more than Rs. 500 crores will be given benefit of the dropping criteria pertaining to past dividend record till such time that they declare their first annual results.

Exemptions:-

Newly listed Securities (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.

The calendar for trade to trade review for 2018 is attached herewith for reference.
Rumour Verification

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.