ASM and GSM what impact does it have on investors?

Slide 1- 

Additional Surveillance Measure (ASM) and Graded Surveillance Measure (GSM) are measures taken by SEBI through which they impose trading curbs on stocks that are extremely volatile. 

Slide 2- 

Measures like these in addition to others (like price band, periodic call option etc) help to protect investors by controlling speculative activities. 

Slide 3- 

ASM: Additional Surveillance Measure

ASM essentially puts restrictions on intraday trading in stocks by disabling margin trading i.e brokers have to collect 100% margin on stocks in ASM.

The objective is to discourage traders to take heavy positions in these stocks and give stability to the prices. 

Slide 4- 

What does it imply

A stock that enters the list is moved into a 5% price band the next day. 

The stock will be halted from trading for the rest of the day if it breaches the 5 per cent limit. 

From the fifth trading day, a 100% margin is required. 

The Exchanges conduct reviews every two months and stocks can move in and out of the list. 

Slide 5- 

The SEBI adds a stock to the ASM if it meets ANY of the criteria below:

1) The Spread is > 200% in the last 3 months, and the concentration of top 25 clients is > 20%. 

 2) The spread is > 200% and the stock has hit the price band > 30% of the time. 

3) The stock has a negative PE and has shown a price movement of >100%  in the last 30 trading days and the concentration of top 25 clients is >30%. 

Slide 6- 

4) A stock with a market cap over ₹500 crores whose price has moved >100%, the, spread is > 200% in the last 365 days and >50% in the last 90 trading days

5) A stock with a market cap above ₹500 crore where the concentration of top 25 clients in a quarter is greater than or equal to 50% and five or more of these clients have 50% or more of their trading activity in it.

Slide 7- 

GSM: Graded Surveillance Measures 

Through GSM, the SEBI focuses on stocks with abnormal price movements not justified by their fundamentals. 

The SEBI wants to identify these stocks with a potential chance for misconduct (due to their illiquid nature and subpar fundamentals) to safeguard investor interests. 

This review process is conducted twice in a year (along with quarterly reviews) 

Slide 8- 

The stock is put into one of the four stages of surveillance.