Trading & Surveillance

Market surveillance plays a key role in ensuring safety and integrity of the markets as it the process of prevention and investigation of abusive, manipulative or illegal trading practices in the securities markets. Surveillance Measure is an initative by the regulatory bodies and exchanges to protect traders and investors by monitoring price and volatility and detecting misleading activities like insider trading, fictitious transactions, and more. 

SEBI (Securities and Exchange Board of India) along with the stock exchanges have initiated an Additional Surveillance Measure or ASM to safeguard investors’ interests by ensuring there are no market speculations or manipulations like unexpected price movements. The stocks are categorized under ASM for surveillance based on criteria specified by NSE here.

GSM or Graded Surveillance Measure is a system used by Indian Stock Exchanges like NSE and BSE to alert traders/investors and ask them to be extra cautious while dealing in certain securities which have been categorized under GSM. Scrips can be classified under GSM due to abnormal price hike that doesn’t match with the company’s financial health, are illiquid, have negligible market capital, and are underpreforming.

The main aim of the ASM framework is to control stock volatility, while the primary objective of GSM is to protect the investors from underperforming stocks by not allowing intraday trading and to advise them to be extra vigilant while dealing with securities that are witnessing unusual price fluctuations. Both these frameworks are introduced with different objectives, but their main goal is to protect traders and investors. 

SEBI and Exchanges jointly decides the objective criterion to shortlist securities under ASM based on the following parameters:
1. High Low Variation
2. Client Concentration
3. Close to Close Price Variation
4. Market Capitalization
5. Volume Variation
6. Delivery Percentage
7. No. of Unique PANs & PEs

On the basis of below-mentioned pointers, Regulatory Body and the Exchanges make their decision of adding a scrip under GSM category:
1. Periodic Call Auction Session for Illiquid Securities
2. Periodic Review of Movement of Securities to/from Trade for Trade
3. Persistent Noise Creators
4. Rumour Verification and Clarification in case of Spurt in Price/Volume

Every 2 months in the case of ASM and every quarter in the case of GSM, the stock can go in and out of the list based on the review carried out by the exchange. 

Please find the detailed surveillance measures under ASM here.