NSE Additional Surveillance Measure (ASM)

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

ASM (Additional Surveillance Measures)

ASM (Additional Surveillance Measures) refers to the increased surveillance measures by SEBI and the exchanges, which are a part of a larger effort to improve market integrity and protect investors' interests.

What is the ASM list?

ASM list is a list of securities identified under the ASM framework. BSE and NSE release ASM lists in accordance with SEBI guidelines. This helps keep the equities markets secure for investors by limiting stock price volatility. A stock in the ASM list is evaluated on the basis of the following parameters:

According to NSE, the primary objectives behind the introduction of ASM is to

  1. Alert and advice investors to be extra cautious while dealing in these securities.
  2. Advise market participants to carry out necessary due diligence while dealing in these securities.

ASM stocks have been divided into two types - Long-term and short-term, and they are further divided into various stages such as ASM Long Term Stage 1, ASM Short Term Stage 2, etc.

The criteria for selection into the ASM list is, if

How ASM affects Investors and Traders?

It would be really challenging to do intraday trading in ASM-listed stocks. Traders dealing in these stocks must deposit a 100% margin, and these counters are subject to a 5% circuit filter. This means that the stock price of an ASM-listed stock cannot fluctuate by more than 5%, thus limiting the profit or loss for traders.

These ASM stocks are likely to witness a fall in prices due to negative bias against them in the market, thus spelling bad news for their investors. It would also lead to a loss of profit for existing investors. Long-term investors won't be affected much by short-term fluctuations or unfavorable news.

Such restrictions will deter speculators and intraday traders from taking large stock stakes. It is common for such traders to flee, resulting in a loss of liquidity and a reduction in stock prices. Unstable traders will no longer be able to withdraw large sums of money at once due to these limits. As a result, the stock price will be more stable. Thus, these ASM measures specifically benefit uninformed investors by reducing stock market speculation.

What investor should do in ASM Listed Stocks?

If an investor owns stock in the asm list, there would not be much change in trading, but reduced leverage may result in lower counter volumes. These ASM shares could not be used as collateral.

Long-term investors will benefit from ASM. ASM-listed stocks may experience short-term panic, but this is helpful for reputable stocks since it eliminates speculation.

In ASM-listed stocks, stay away from new entries. The stock price is anticipated to fall further as a result of the trading restrictions.

In view of the above, investors are advised to examine the stock's fundamentals and stay invested if they are favorable. It would always be fruitful to seek advice from a stock market professional when necessary. If the company's fundamentals are weak, it would be better to get out soon.

See also: ASM List NSE, ASM List BSE

In order to see ASM Stock List, visit: https://marketsmithindia.com/mstool/nseasmlist.jsp#/

Frequently Asked Questions

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

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

Following discussions in joint surveillance meetings, SEBI and Exchanges have decided that, in addition to the aforementioned measures, there will be an Additional Surveillance Measure (ASM) on securities with surveillance concerns based on objective parameters such as price variation volatility, and so on.

2. When has the ASM framework come into force?

The monitoring of securities under the 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 numbers: 20180321-46 & 20180322-14 on March 21, 2018, and March 22, 2018, respectively informing the market participants about the introduction of the ASM framework along with the first list of shortlisted securities qualifying for application of ASM.

3. 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.

4. 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 previously mentioned, the ASM framework will work in addition to the Exchange's existing actions on the company's securities. If the securities are already attracting any of the ASM framework's actions, those actions will continue to work in tandem with the ASM framework's relevant actions.

5. How will the market participants be made aware of various Additional Surveillance Measures undertaken by the exchanges on securities on short notice?

Both BSE and NSE have already issued a number of circulars providing market players with information on the ASM framework and the unified list of businesses, and this practice would continue in the future as well. All surveillance operations will be triggered based on particular criteria and will be implemented in a coordinated manner across the Exchanges, with very short notice typically delivered aftermarket hours one trading day before the effective date.

6. How will the Trading Member be intimated about an increase in Margin? When does the Margin get released?

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

The margin shall be released as per the extant process of release of Margin by the Clearing Corporation.