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Economy
Mahesh

06/06/23 07:18 AM IST

Enhanced surveillance for MSME

In News
  • To curb volatility in small-cap counters, leading stock exchanges BSE and NSE have put in place an enhanced surveillance mechanism for companies that have a market cap of less than ₹500 crore.
About Mechanism
  • The Enhanced Surveillance Measure (ESM) will come into effect from June 5, marking a crucial milestone in the regulatory landscape of stock exchanges.
  • This mechanism will be instrumental in monitoring and controlling the price fluctuations of small-cap companies, providing stability to the market.
  • The parameters for shortlisting the securities under the ESM framework include high-low price variation and close-to-close price variation.
  • Under the framework, the trading for these securities will be settled through a trade for trade mechanism with a price band of 5 per cent or 2 per cent (if the scrip is already in the 2 per cent band).
  • These metrics enable the identification of securities that display excessive price swings, warranting closer monitoring and potential regulatory intervention.
  • Securities falling under the ESM framework will have trading conducted through a trade-for-trade mechanism. A price band of 5% will be applicable for most securities. However, for securities that are already in the 2% price band, the trading will be settled within the existing 2% range.
  • This mechanism ensures a controlled trading environment for these securities, limiting sudden and drastic price movements.
  • The ESM framework excludes certain types of securities from the shortlisting process. Securities of public sector enterprises, public sector banks, and those on which derivative products are available are not subject to this enhanced surveillance.
  • This exclusion aligns the surveillance mechanism with the specific dynamics and requirements of small-cap companies.
  • Securities identified under Stage II of the ESM framework must undergo a minimum surveillance period of one month. If, during the weekly stage review, a security demonstrates a close-to-close price variation of less than 8% within a month, it will transition from Stage II to Stage I.
Source- Live Mint

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