Sebi to increase surveillance framework on SME segment, with ASM and T2T settlement

During a discussion, CNBC Awaaz learnt that SME is a segment where the compliance requirements and regulatory oversight are less, and market cap and equity are small and therefore the segment is more prone to manipulation.

The market regulator may soon bring stocks in the small and medium enterprises (SME) segment under additional surveillance frameworks--the Additional Surveillance Measure (ASM) and Trade-to-Trade (T2T) settlement--according to CNBC Awaaz.

The Securities and Exchange Board of India (Sebi) seems to be worried about the possibilities of stock-price manipulation in this segment, which has been seeing a lot of retail interest.

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Scrips are placed under ASM if they meet certain criteria including severe variation between high and low prices and variation in volumes versus the monthly average, and they invite higher margin requirements and T2T settlement. Securities moved to T2T settlement can be bought and sold for delivery, they will not be available for intraday trading.

During a discussion, CNBC Awaaz learnt that SME is a segment where the compliance requirements and regulatory oversight are less, and market cap and equity are small and therefore the segment is more prone to manipulation. Also, SME IPOs are approved by the exchanges and not by Sebi.

With these considerations in focus, Sebi has engaged in consultations with the exchanges, and as per information from market sources, the ASM and T2T measures, previously limited to mainboard stocks, will now extend their applicability to the SME segment.

According to CNBC Awaaz, this regulatory change will be implemented soon.

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This June, Sebi had brought small-cap securities with market cap of less than Rs 500 crore under the Enhanced Surveillance Measures (ESMs). Securities under the ESM-I stage require a 100 percent margin, have T2T settlement and will have to remain under this framework for at least three months; securities under ESM-II will also require 100 percent margin and have T2T settlement, and their trading will be permitted only once a week and they will need to be under this framework for at least a month.