The BSE has clarified that measures proposed to curb excessive price movement in securities that are listed only on the exchange will be applicable for a minimum of 30 days and for stocks with a market capitalisation of less than Rs 1,000 crore.
The stock exchange had introduced a new surveillance framework called the ‘Add-on Price Band Framework’ on August 9, under which certain securities would be subjected to weekly, monthly and quarterly price limits in addition to their daily price bands.
The add-on framework will apply to BSE-exclusive securities in groups X, XT, Z, ZP, ZY and Y, the exchange said in a statement on August 11. The securities should have a price of Rs 10 and more as on the review date and the market capitalisation of the security should be less than Rs 1,000 crore, it said.
A security will be placed in the framework for a minimum period of 30 calendar days, the exchange said, reducing the duration from 90 calendar days mentioned in its statement dated August 9.
A review of shortlisted securities under the framework – whether to exclude or include them – will be carried out on a monthly basis. The measures were introduced to curb excessive price movements in mid-cap and small-cap stocks.
The BSE MidCap Index fell 0.22 percent on August 11, while the BSE SmallCap Index dropped 0.83 percent.
Experts said the markets will take the clarification positively. Only a limited number of stocks will be affected by the additional price limits, they said.
Currently, the shares of 4,748 companies are listed on the BSE, of which 849 have been suspended, leaving 3,899 available for trading. The framework applies to companies that are listed only on the BSE, which is about 2,400 companies.
The BSE said the add-on price bands will be in addition to the daily price bands of such securities and will be expressed in terms of a ratio of the closing price of the security. Depending on the daily price band slab applicable for a security, there will be different ratios of add-on price bands, it said.
“Once the security reaches the respective price limit of a period, trading shall be allowed only within the respective prescribed price range and the same shall not be revised till the beginning of the next cycle i.e. next week/month/quarter, wherein new price limits shall be computed for the respective periods,” the BSE said.
The final upper daily price band will be the minimum of all individual upper price band limits and the final lower daily price band will be the maximum of all individual lower price band limits.
The framework will be implemented in addition to all other surveillance measures imposed by the exchanges.
The BSE said that the shortlisting of securities under the framework will be purely on account of market surveillance and should not be construed as an adverse action against a company or entity.
The measures are scheduled to come into effect on August 23, 2021.
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