Additional Surveillance Measure (ASM)

Frequently Asked Questions (FAQs)


1)   What is the purpose for introduction of ASM framework?


In order to enhance market integrity and safeguard interest of investors, Securities and Exchange Board of India (SEBI) and Exchanges, have been introducing various enhanced surveillance measures such as Graded Surveillance Measure (GSM), reduction in price band, periodic call auction and transfer of securities to Trade for Trade segment from time to time.


The main objective of these measures are to -


   Alert and advice investors to be extra cautious while dealing in these securities

   Advise market participants to carry out necessary due diligence while dealing in these securities.

In continuation to various surveillance measures already implemented, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the aforesaid measures there shall be Additional Surveillance Measure (ASM) on securities with surveillance concerns based on objective parameters viz. Price variation, Volatility etc.


2)   How are the securities shortlisted under ASM framework?


The shortlisting of securities for placing in ASM framework is based on an objective criteria as jointly decided by SEBI and Exchanges covering the following parameters:


   High Low Variation

   Client Concentration

   No. of Price Band Hits

   Close to Close Price Variation

   PE ratio

   Market Capitalization


The criteria for shortlisting & review of securities under ASM Framework is as given below. The following five criteria shall be made applicable for selection of securities in the ASM

framework.


i.  High - Low price variation (based on corporate action adjusted prices) of 200% or more in the last three months AND Concentration of top 25 clients in the last three months is 30% or more. OR

ii.  High - Low price variation (based on corporate action adjusted prices) of 200% or more in the last three months AND number of price band hits (upper or lower) in the last three months is 30% or more. OR

iii. Close to Close price variation (based on corporate action adjusted prices) in the last 30 trading days is 100% or more AND PE is negative or more than 30 AND the concentration of top 25 clients in the last one month is 30% or more. OR

iv. Close to Close Price variation (based on corporate action adjusted prices) in 365 days greater than 100% AND High - Low Variation in 365 days greater than 200% AND Market Cap above Rs. 500 Crores AND High Low Variation in 90 trading days greater than 50%. OR

v.  Close to Close price variation (based on corporate action adjusted prices) greater than or equal to 50% in last three months AND Concentration of top 25 clients in a quarter in the scrip is greater than or equal to 50% AND 5 or more clients out of the top 25 clients having 50% or more of their trading activity in a scrip AND Market Cap above Rs. 500 crores. OR


vi. Monthly volume variation in a scrip compared to its average volume variation over the period of last 3 months is greater than 500 % on NSE and BSE + percentage monthly average volume variation for the same period AND concentration of top 25 clients greater than 25% in a month AND average delivery percentage less than 30% AND Market Cap above Rs.500 crores AND daily average volume greater than or equel to 10000 & trading at least 50% of the days available in the month AND greater than 50% close to close price variation in last one month.


Exemption: Bulk / Block (maximum of buy /sell value), i.e., Average Volume of Bulk or Block Quantity/Average Volume of the Security greater than 50%.


The following securities shall be excluded from the process of shortlisting of securities under

ASM:


    Public Sector Enterprises and Public Sector Banks

    Securities already under Graded Surveillance Measure (GSM)

    Securities on which derivative products are available

    Securities already under Trade for Trade


The aforementioned criteria is dynamic in nature and subject to change from time to time.


3)   When has the ASM framework come into force?


The monitoring of securities under ASM framework has come into force with effect from March 26, 2018.   The Exchange, in coordination with other Exchanges, has issued circular having download reference number(s): NSE/SURV/37253 & NSE/SURV/37262 on March 21,2018 and March 22, 2018 respectively informing the market participants about introduction of ASM framework along with the first list of shortlisted securities qualifying for application of ASM. Subsequently, the updated list of companies are being published from time to time.


4)   What are the various surveillance actions under ASM? And what do they signify?


The underlying principle behind ASM framework is to alert the market participants that they need to be extra cautious and diligent while dealing in such securities as the need has been felt to place them under higher level of surveillance.

The surveillance actions applicable for the shortlisted securities is as under:


   Securities shall be placed in Price Band of 5%

   Margin shall be levied at the rate of 100%


The list of scrips shortlisted for action under ASM shall be disseminated in advance (T day). In this regard, the imposition of 5% price band shall be effective from next trading day (T+1 day) and imposition of 100% margin shall be effective from T+5 trading day.


For eg. If a security is shortlisted under ASM on July 23, 2018 (T day) after-market hours, inclusion under ASM and imposition of 5% Price band shall be applicable w.e.f. July 24, 2018 (T+1 day) and the 100% margin shall be effective July 30, 2018 (T+5 days).


Surveillance action post 1 month after inclusion in ASM:


   Scrips having PE ratio greater than 100 shall be placed in the Trade for Trade segment.


5)   Should shortlisting under ASM be construed as an adverse action against the concerned company / entity?


The shortlisting of securities under ASM is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company / entity.


6)   Some of the securities which have been identified under ASM are already under various surveillance actions mentioned in the ASM framework. What does this mean?


As stated, ASM framework shall work in addition to existing actions undertaken by the Exchange on the company’s securities. In case the securities are already attracting any action mentioned in ASM framework, then such action shall continue to work in conjunction with appropriate action under ASM framework.


7)   Where do I get the complete list of securities under ASM?


A file (List_of_securities_shortlisted_under_ASM.csv) containing securities under ASM is available on our website at the following link:

https://www.nseindia.com/invest/content/equities_surv_actions.htm


8)   Will the identified securities remain under ASM permanently?


Securities under the ASM framework shall be reviewed after two months on a daily rolling basis for applicability of ASM Framework.


The review shall be on the following lines:


     Scrips having PE Ratio less than 10 (PE ratio is between 0 to 10) shall be moved out of ASM framework and close price shall become the base price for subsequent reviews.


     Scrips having PE ratio less than PE ratio of Nifty 500 Index shall be moved out of ASM framework in case such scrips does not meet entry criteria stated above.


     Scrips having PE ratio less than 2 times PE ratio of Nifty 500 Index shall be continue to remain in ASM, however such scrips shall be moved out of Trade for Trade segment provided the scrips were transferred to Trade for Trade segment on account of ASM.


9)  Besides the actions stated in ASM framework, can there be any other regulatory action against the companies identified therein?


Surveillance actions under ASM framework are without prejudice to the right of Exchanges and SEBI to take any other surveillance measures, in any manner, on case to case basis or holistically depending upon the situation and circumstances as may be warranted.


10)  How will the Trading Member be intimated about increase in Margin?


The margin rate shall be intimated in the VAR Begin of Day file published on the website for the day it is applicable.


11)  When does the Margin get released?


The margin shall be released as per the extant process of release of Margin by National Securities Clearing Corporation Limited (NSCC


12) What are the other conditions based on which Additional Surveillance Margin in Derivative Segment?


1.   A potential scenario of 20% fall in all index/ securities is considered. Loss due to such fall on the portfolio after considering available margins is collected as additional surveillance margins for clients fulfilling specified criteria.


2.   A potential scenario of 17.74% rise in all index/ securities shall be considered. Loss due to such rise on the portfolio after considering available margins and hedged positions, if any basis the holdings provided by depositories, shall be collected as additional surveillance margins for clients fulfilling specified criteria.


Additional Surveillance Margin (ASM) shall be levied on following clients subject to a minimum of 50% of cumulative projected loss across all clients is covered.


1.   For a market fall scenario as specified above. Additional Surveillance Margin shall be levied  for clients  having loss  of around Rs.1 crores  after considering available margins.


2.   For a market rise scenario as specified in above, Additional Surveillance Margin shall be levied  for clients  having loss  of around Rs.5 crores  after considering available margins and underlying portfolio.


3.   In case a client meets both the above criteria for ASM, then the maximum amount computed in (1) and (2) above shall be collected as Additional Surveillance Margin.


4.   Additional Surveillance Margin as above shall be blocked from the collaterals of member on T+1 day basis.


This conditions are applicable till 28th September 2018 and the same will be discontinued by the exchange.


Related Circular Links


Additional Surveillance Measures - 21-MARCH-2018

Additional Surveillance Measure (ASM) - Update - 22-MARCH-2018

Additional Surveillance Measures (ASM) - Update - 11-MAY - 2018

Additional Surveillance Measure (ASM) - Update - 22-JUNE-2018

Additional Surveillance Measure (ASM) - Update - 20-JULY-2018


Additional Surveillance Margin - F & O - Circular No.1

Additional Surveillance Margin - F & O - Circular No.2

Additional Surveillance Margin - F & O - Circular No.3


13) What % of Additional surveillance Margin would be levied for equity derivative segment?


We would like to draw your attention to NSE’s Circular Nos.105 /2018 dated Sep 1, 2018 and 109/2018 dated Sep 4, 2018 respectively. As detailed in Circular No.105 /2018, in addition to Initial margin and Exposure margin, Exchange would be levying Additional Surveillance Margin (ASM) in Equity Derivatives Segment on all gross open positions on Future Contracts and on Short Positions in Options Contract. The effective date of implementation is as follows:


Effective date of
Implementation

Index

Options*

Index

Futures

Stock Options and Futures

September 14, 2018
1.00%
0.50%
1.25%
September 28, 2018
2.00%
1.00%
2.50%
October 26, 2018
3.00%
1.50%
3.75%
November 30, 2018
4.00%
2.00%
5.00%


*In case of Out-of-the-money index option contracts, the ASM shall be restricted to 2% only. For this purpose, Out-of-the-money index options contracts shall be defined as options contracts with strike prices which are out-of-the-money by not less than 5% away from the previous day closing price of the underlying Index. The above mentioned ASM shall be added to the applicable exposure margin of the respective index/stock futures and options contracts.


https://www.nseindia.com/content/circulars/CMPT38768.pdf