ASM and GSM what impact does it have on investors?
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.
Measures like these in addition to others (like price band, periodic call option etc) help to protect investors by controlling speculative activities.
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.
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.
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%.
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.
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)
The stock is put into one of the four stages of surveillance.