In a move designed to counter alleged manipulation and high speculation in small and medium enterprises (SME) stocks, the National Stock Exchange (NSE) announced on Monday that these stocks will be integrated into the Additional Surveillance Measure (ASM) and Trade-to-Trade (T2T) settlement framework. The decision followed observations by both the Securities and Exchange Board of India (SEBI) and stock exchanges of irregularities within the SME stock sector.
The ASM system is applied to stocks that meet certain criteria, including substantial disparities between high and low prices and fluctuations in trading volumes compared to their monthly average. Stocks falling under this system will face increased margin requirements and T2T settlement.
The T2T settlement framework allows for the purchase and sale of stocks for delivery but restricts intra-day trading. This feature will be extended to SME stocks as part of the new regulatory changes.
The Joint Surveillance Meeting of Exchanges and SEBI confirmed that the existing Trade for Trade (TFT) Framework would be adapted to SME stocks with specific modifications, as per a press release from NSE. This development emphasizes the ongoing commitment of regulatory bodies to promote transparency and fairness in stock trading, particularly within the SME segment.
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