ASM (Additional Surveillance Measure) works as an effective regulatory mechanism in the stock market to ensure fair and transparent trading practices. The process involves stock exchanges closely monitoring specific securities that meet predetermined criteria. These criteria typically include factors such as price volatility, trading volumes, and market capitalization. When a security meets the predefined threshold, it is placed under ASM surveillance.
In India, ASM (Additional Surveillance Measure) was introduced by the Securities and Exchange Board of India (SEBI) as a regulatory mechanism to ensure market integrity and protect the interests of investors. It is implemented by major stock exchanges such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). ASM aims to identify securities that display abnormal price movements, high volatility, or have a higher potential for market manipulation.
When a security meets the predefined criteria set by the exchange, it is placed under ASM surveillance. Companies under ASM face increased scrutiny, which can impact their market perception and reputation. For investors, securities under ASM may have trading restrictions such as increased margin requirements, reduced position limits, or higher transaction costs. Investors need to exercise caution and conduct thorough research when considering investments in securities under ASM.
Overall, ASM in India plays a crucial role in maintaining market stability, enhancing investor protection, and detecting potential risks. It acts as a proactive measure to ensure fair and transparent trading practices, contributing to the overall health of the Indian stock market.
Criteria for ASM
The criteria for selecting securities under ASM are determined by the respective stock exchanges and regulatory authorities. While the specifics may vary, the general guidelines revolve around identifying securities that display abnormal price movements or have a high potential for market manipulation. Here are some common criteria considered for ASM inclusion:
Price Volatility: Securities that exhibit significant price fluctuations within a short period may be considered for ASM surveillance. This helps identify stocks that are susceptible to manipulation or sudden speculative activity.
Trading Volumes: Unusually high trading volumes in a security can be a sign of potential market manipulation. Stocks with abnormally high trading volumes may be selected for ASM to ensure close monitoring and maintain market integrity.
Market Capitalization: ASM may also focus on securities with specific market capitalization thresholds. Stocks that fall below or exceed certain market capitalization limits may be subjected to increased surveillance to prevent any undue influence on market prices.
Corporate Actions: Certain corporate actions, such as mergers, acquisitions, or restructurings, may trigger ASM surveillance. These actions can potentially impact the stock’s price and create opportunities for market manipulation.
Regulatory Alerts: Regulatory authorities may issue alerts or warnings about specific securities based on their investigation or intelligence. Such alerts can prompt the inclusion of a security under ASM, ensuring that any potential risks or irregularities are closely monitored.
The criteria for ASM can change as market dynamics and regulatory requirements evolve. Stock exchanges and regulatory bodies regularly review and update these criteria to effectively identify securities that require enhanced surveillance. By following these criteria, stock exchanges and regulatory authorities strive to uphold market integrity, protect investor interests, and promote fairness and transparency in trading. It’s important for investors and market participants to stay informed about the specific ASM criteria by referring to the guidelines provided by the relevant stock exchanges and regulatory authorities.
ASM Restrictions on Security
When a security is placed under ASM (Additional Surveillance Measure) in the stock market, certain restrictions are imposed to ensure market integrity and protect investors. These restrictions are designed to prevent potential market manipulation and maintain a level playing field. Here are some common ASM restrictions on securities:
Increased Margin Requirements: Securities under ASM may require higher margin requirements for trading. Margin refers to the amount of money an investor needs to deposit with their broker to open a position. By increasing margin requirements, regulators aim to limit excessive speculation and reduce the risk associated with trading those securities.
Reduced Position Limits: Position limits define the maximum quantity or value of a security that an investor can hold or trade. When a security is under ASM, regulators may impose lower position limits. This restriction prevents concentration of a security in the hands of a few investors and promotes a more diversified market.
Restricted Order Types: Certain order types may be restricted for securities under ASM. For example, stop-loss orders, which automatically trigger a sale when the security reaches a predetermined price, might be limited or not allowed. This restriction aims to prevent potential manipulation through the triggering of stop-loss orders.
Higher Transaction Costs: Securities under ASM may be subject to higher transaction costs or brokerage charges. This can include increased brokerage fees, exchange fees, or other charges associated with trading those securities. Higher transaction costs act as a deterrent to excessive trading and promote more informed and strategic investment decisions.
Investors should be aware of ASM restrictions when trading securities under surveillance. These restrictions, such as increased margin requirements, reduced position limits, restricted order types, and higher transaction costs, aim to uphold market integrity and safeguard investors. By understanding and adhering to these limitations, investors can navigate the market more effectively, make informed decisions, and trade with confidence in a fair and transparent environment.
How to Check the ASM Status of a Security
Checking the ASM status of a security is a straightforward process that can be done by following a few simple steps. Here’s how you can check the ASM status of a security:
Visit the Stock Exchange Website:
To begin, visit the official website of the stock exchange where the security is listed. For example, if the security is listed on the National Stock Exchange (NSE) in India, go to the NSE’s website.
Access the Security Information:
Look for a section or tab on the website that provides information on listed securities. It is usually labeled as “Markets,” “Trading,” or “Listed Companies.”
Search for the Security:
Once you access the relevant section, you will typically find a search bar or a list of securities. Enter the name or symbol of the security you want to check the ASM status for.
Check the Security Details:
Upon locating the security, click on its name or symbol to access its detailed information page. This page should contain various details about the security, including its trading status and any additional measures in place.
Look for the ASM Status:
On the security’s information page, search for any mention of ASM. The stock exchange will clearly indicate whether the security is currently under ASM surveillance or not.
Understand the Implications:
If the security is listed as under ASM, it means it is subject to increased monitoring and may have specific trading restrictions in place. Make sure to read the associated information carefully to understand the implications for trading or investing in that security.
It is important to note that the process of checking ASM status may vary slightly between different stock exchanges. However, the general principles remain the same.
In conclusion, checking the ASM status of a security involves visiting the stock exchange’s website, accessing the security’s information, and looking for any indication of ASM surveillance. By following these steps, investors can stay informed about the ASM status of a particular security before making investment decisions.
Remember, staying updated with the ASM status can help investors make informed choices and navigate the stock market more effectively.
FAQs about ASM
In many instances, these financial assets may be involved in fraudulent activities. To tackle this issue, SEBI, the regulatory authority, aims to use GSM technology to detect such poorly performing assets early on and protect investors from engaging with them.
ASM, which stands for Additional Surveillance Measure, is an important initiative undertaken by the Securities and Exchange Board of India (SEBI) in collaboration with the Exchanges. Its primary aim is to strengthen market integrity and protect the interests of investors. ASM focuses on objective criteria such as price, volume variation, and volatility to identify potential concerns in the market. This analysis is conducted specifically on Thursdays to ensure comprehensive monitoring and timely actions, if required.
The ASM list comprises of securities that are presently under scrutiny due to fluctuations in their prices, volatility, changes in trading volume, and other relevant factors. Its purpose is to serve as a notification to investors, urging them to exercise caution when engaging in transactions involving these securities.
Market Impact: Long-term automated surveillance mechanisms (ASM) can greatly influence the trading activities of the specified securities. The introduction of stricter regulations and increased monitoring could impact the ease of buying and selling, the overall amount of trading, and the way prices fluctuate.
The Additional Surveillance Measure (ASM) is a crucial mechanism in the stock market that monitors securities with abnormal price movements or trading volumes. ASM ensures transparency, protects investors, and maintains fair trading practices. Companies under ASM surveillance may face increased scrutiny, but it also allows them to improve transparency and governance. Investors should exercise caution when dealing with ASM securities. Checking the ASM status of a security can be done on the official websites of stock exchanges. Overall, ASM contributes to market integrity and investor protection.