Additional Surveillance Mechanism (ASM)

The National Stock Exchange (NSE) has added an additional surveillance mechanism to very well-known business tycoons’ enterprises (ASM).

Why is this in the news?

  • The Adani Group’s market value has dropped by $108 billion since Hindenburg Research accused it of stock manipulation and accounting fraud.

What exactly is a Surveillance Mechanism (ASM)?

  • The Additional Surveillance Measure (ASM) was implemented in 2018 by SEBI and recognised stock exchanges to control the extremely volatile stocks on the Indian stock market.
  • In the stock market, ASM serves as a control measure for speculative trading, protecting retail investors’ interests and keeping them out of potentially dangerous trading situations.

There are two parts of additional margins:

  • Long-term ASM
  • Short-term ASM

What is the ASM stock market list?

  • ASM list refers to a collection of securities that are currently being monitored due to factors such as price volatility, volume variation, and so on.
  • Stocks that have been shortlisted for the ASM list alert investors to unexpected price movement.
  • To prevent speculation, these stocks are subject to a variety of trading restrictions.
  • Stocks on the ASM list are subject to stricter regulations.
  • They are not permitted to be pledged or to use intraday leverages such as bracket and cover orders.

How does it function?

  • For example, the stock will be assigned a 5% price band the day it is added to the ASM list; thereafter, it may only move 5% up or down from the previous day’s closing level.
  • As a result of this limit violation, the stock is no longer available for trading on the market.
  • Furthermore, by the fifth day, the investor should have 100% margin money to trade the stock.
  • The selected securities will be monitored further based on predetermined criteria, and once the criterion is met, they will be transferred into Trade to Trade settlement.

Criteria to determine ASM list stocks

The following criteria, agreed upon by SEBI and exchanges, are used to select stocks for inclusion in ASM:

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