Capital Markets: Challenges and Developments

What is Additional Surveillance Mechanism (ASM)?


From UPSC perspective, the following things are important :

Prelims level: Additional surveillance mechanism (ASM)

Mains level: Not Much

The National Stock Exchange (NSE) placed very famous enterprises of business tycoons under the additional surveillance mechanism (ASM).

Why in news?

  • The Adani Group has shed $108 billion in market value since Hindenburg Research accused it of stock manipulation and accounting fraud.

What is Additional Surveillance Mechanism (ASM)?

  • 2018 saw the establishment of the Additional Surveillance Measure (ASM), a measure by SEBI and recognised stock exchanges to control the incredibly volatile stocks on the Indian stock market.
  • ASM in the stock market functions as a control measure for speculative trading to safeguard the interests of retail investors and keep them out of potentially dangerous trading situations.
  • There are two parts of additional margins:
  1. Long-term ASM
  2. Short-term ASM

What is ASM list in the stock market?

  • ASM list means a collection of securities currently under observation owing to variables like price volatility, volume variation, etc.
  • Investors are alerted to unexpected price movement by stocks that have been shortlisted for the ASM list.
  • These equities are subject to various trading restrictions to halt any speculation.
  • The regulations that apply to stocks on the ASM list are more stringent.
  • They are prohibited from being pledged and using intraday leverages like bracket and cover orders, among others.

How does it work?

  • For instance, the stock will be moved to a 5% price band the day it joins the ASM list; from then on, it may only move 5% up or down from the previous day’s closing level.
  • As a result of this limit violation, the stock can no longer trade on the market once this limit is violated.
  • In addition, the investor ought to have 100% margin money to trade the stock as of the fifth day.
  • The selected securities will be monitored further, based on predetermined criteria and transferred into Trade to Trade settlement once the criterion is met.

Criteria to determine ASM list stocks

The following criteria are used to select stocks for inclusion in ASM and were mutually decided upon by SEBI and Exchanges:

  • Close-to-Close Price Variation
  • Market Capitalisation
  • Volume Variation
  • Delivery Percentage
  • High Low Variation
  • Client Concentration
  • of Unique PANs


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