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Surveillance

BSE is one of the few stock exchanges in the world, which has obtained the ISO
certification for its surveillance function. The main objective of the surveillance
function
is
to
promote
market
integrity
in
two
ways,

By monitoring price and volume movements (volatility) as well as by detecting


potential market abuses (fictitious/ artificial transactions, circular trading, false or
misleading impressions, insider trading, etc) at a ascent stage, with a view to
minimizing the ability of the market participants to influence the price of any
Security in the absence of any meaningful information

The

By taking timely actions to manage default risk.


surveillance activities at BSE are allocated

Price Monitoring: is mainly related to the price movement/ abnormal

to

three

Cells:

fluctuation in prices or volumes of any Security

Investigations:

conducting

snap

investigations/examinations/detailed

investigations in Securities where manipulation /aberration is suspected.

Position Monitoring: relates mainly to abnormal positions of Members in order


to manage the default risk

Price Monitoring Cell


The function of this Cell is to detect potential market abuses at a nascent stage to
reduce the ability of the market participants to unduly influence the price of the
Securities traded at BSE by taking surveillance actions like reduction of circuit filters,
imposition of special margin, transferring Securities on a trade-to-trade settlement
basis,
suspension
of
Securities/
members,
etc.
These pro-active measures are taken based on the analysis/ processing of alerts
generated based on various parameters and other inputs like news, company
results, etc. The broad parameters considered for generation and analysis of alerts
are price movement, top 'n' turnover, Securities traded infrequently, Securities hitting
new high/ low, Securities picked up for rumour verification, etc.

The Securities picked up based on the preliminary analysis/ enquiries are forwarded
to
the
Investigation
cell
for
further
examination/
investigation.
The detail rationale of the surveillance actions taken by BSE from time to time are as
follows
:
Special

Margins

Special margins are imposed on such Securities which have witnessed an abnormal
price/ volume movement. Special margin is imposed by BSE @ 25% or 50% or 75%
as the case may be, on the client wise net outstanding purchase or sale position (or
on
both
side).
Reduction

of

Circuit

Filters

The circuit filters are reduced in case of illquid Securities or as a price containment
measures. The circuit filters are reduced to 10 % or 5 % or 2 % as the case may be,
based on the criteria decided by the Surveillance Department. No circuit filters are
applicable on Securities on which derivative products are available. However, BSE
imposes 10% dynamic circuit filter on these Securities to avoid punching errors, if
any.
A list of equity stock on which dynamic circuit filter applied is attached.
Circuit Filter of 20 % is applicable on other Securities which are not included in the
above-mentioned
category.
Trade-to-Trade
As a part of Surveillance measure the Exchange transfers various Securities for
settlement on a Trade-to-Trade basis. The said action is reviewed on Monthly basis
based on market capitalization, price earnings ratio, price variation vis--vis the
market movement, volatility, volume variation, client concentration and number of
non promoter shareholders etc. The criteria for shifting Securities to/fro for
settlement on T2T basis are decided jointly by the stock exchanges in consultation
with SEBI and reviewed periodically. Securities on which derivatives products are
available are not considered for transfer to Trade for Trade segment.
If a Security is shifted for settlement on Trade-to-Trade basis, selling/ buying of
shares in that Security results into giving/ taking delivery of shares at the gross level
and no intra day netting off/ square off facility is permitted. The Securities which form
part of the 'Z group' are compulsorily settled on a trade-to-trade basis.
In order to bring greater transparency and to eliminate various allegations about

manner of shifting of Securities to/from the T2T segment criteria for shifting
Securities
to/fro
Trade
for
Trade
segment
is
given
below
:
The process of identifying the Securities for moving to Trade to Trade will be done
on a monthly basis along with the price band review process based on the following
criteria
;
Securities satisfying the following criteria on the date of review shall be moved to
trade
to
trade.
As on review date, the security should be in 5% price band for atleast 22 trading
days*
AND
The securities satisfying any of the following criteria A, B, C or D shall be transferred
to
Trade
for
Trade
segment.
Category

A:

PE Criteria

If S& P BSE SENSEX PE Multiple on the relevant date is in the range of 1520 then Securities having PE greater than 30 will be considered.

If S & P BSE SENSEX PE Multiple on the relevant date is greater than 20 or


less than 15 than difference will be rounded off to nearest number and same will
be added / subtracted from 30. However, minimum base of PE Multiple shall be
25. Accordingly Securities having PE greater than this bench mark will be
considered.

Methodology

of

Calculation

of

Securities

PE

For the purpose of calculation of PE, summation of quarterly profit figures of


latest four trailing quarters available with the Exchange out of last five financial
quarters will be considered. If less than four trailing quarterly results are
available then the profits shall be annualized for PE calculation.

All Securities having negative PE shall be considered.

AND

Volatility

Volatility greater than three times S& P BSE SENSEX volatility over a period of
three months.

AND

Price

Variation

Criteria

All Securities where the price variation is in positive direction as below will be
considered:

20% plus S& P BSE 500 / Sectoral Index variation subject to a minimum of
10%.

Category B:

PE Criteria

If S&P BSE SENSEX PE on the relevant date is in the range of 15-20 then
Securities having PE multiple greater than 0 but less than 30 will be considered.

If S& P BSE SENSEX PE Multiple on the relevant date is greater than 20 or


less than 15 than difference will be rounded off to nearest number and same will
be added / subtracted from 30. However, minimum base of PE Multiple shall be
25. Accordingly Securities having PE greater 0 but less than this bench mark will
be considered.

Methodology

of

Calculation

of

Securities

PE

For the purpose of calculation of PE, summation of quarterly profit figures of


latest four trailing quarters available with the Exchange out of last five financial
quarters will be considered. If less than four trailing quarterly results are
available then the profits shall be annualized for PE calculation.

AND

Volatility

Volatility greater than three times S& P BSE SENSEX volatility over a
period of three months.

AND

Price

Variation

Criteria

All Securities where the price variation is in positive direction as below will be
considered:

40% +/- S& P BSE 500 / Sectoral Index.

OR
Category

C:

Market Capitalization

Criteria C shall be applicable to Securities having market capitalization less


than 2 times of the market capitalization arrived at for the review.

Market capitalization threshold shall be linked to the S&P BSE SENSEX


movement between December 1, 2003 (taking base as Rs. 200 Cr on Dec 01,
2003) and present quarterly relevant date, after rounding off to the nearest Rs.
50 Cr of higher of S&P BSE SENSEX movement.

Volume

Variation

Average daily volume variation month over a previous month greater than 200%
+ Average volume variation of S & P BSE 500 constituents. (Computed as
average of average volume variation across the constituents as on relevant
date, rounded off to the nearest 5%), subject to minimum of 200%. (Average
daily volume in the recent month being more than 1000 shares).

AND

Concentration (Gross Purchase plus Gross Sales) of top 10 Clients on the


basis of PAN Number during the month greater than 25%.

AND

Price

Variation

Criteria

20% plus S & P BSE 500 / Sectoral Index variation subject to a minimum of
10%.

OR
Category

D:

Number of non promoter shareholders less than 500 as per the latest shareholding
pattern
available
with
the
Exchange.
Exemptions:Newly listed Securities (IPO) and the securities which are made available for trading
in Trade for Trade segment for the first 10 trading days with applicable price band,
while keeping the price band open on the first day of trading as per SEBI circular
bearing no SEBI/Cir/ISD/1/2010 dated September 2, 2010 shall be dropped till the
time
they
declare
their
first
Quarterly
results.
The calendar for monthly trade to trade review for the period February 2015 to
January
2016
is attachedherewith
for
reference.
* NOTE : The price band criteria shall be made applicable from the review due on
August 1, 2014 and onwards.
Rumour

Top
Verification

The Surveillance Department liaises with the Compliance Officers of the listed

companies to obtain their comments on various price-sensitive corporate news items


appearing in the media. Comments received from the companies are disseminated
to the market by way of BOLT Ticker and/ or Notices on the BSE website. If the
company denies the news / information, a letter is sent to the company asking them
to take up the matter with the concerned media.

Investigation
The Investigation Cell conducts following types of analysis of suspected market
irregularities in a systematic and logical manner and then take appropriate and
timely
actions.

Snap Investigations :
Potential cases of market irregularities are taken up for further analysis. A
preliminary analysis of the trading pattern and corporate developments in the
Security is done to ascertain whether the price or volume variation observed
requires further detailed analysis.

Examinations :
Examinations are a more detailed form of preliminary analysis of the trading
pattern and various developments in the company wherein a report is prepared.
These examinations are conducted usually on receiving a reference from SEBI
or any other department of BSE or is based on an investor complaint.

Investigations :
These are full-fledged and detailed investigations wherein a complete analysis is
conducted in a systematic and logical manner based on the information
available with BSE and information sought/received from the Members,
companies, depositories and various other sources. These investigations are
conducted to establish the manipulation that was suspected in the preliminary
analysis.

The Surveillance Department imposes a penalty or deactivates the BOLT terminals

or suspends the Members who are involved in market manipulation, based on the
input/ evidence available from the investigation report or as and when directed by
SEBI. The cases of habitual offenders are taken to the Disciplinary Action
Committee, which takes necessary disciplinary actions against such Members.

Position Monitoring
The Surveillance Department closely monitors the outstanding exposure of
Members on a daily basis. For this purpose, it has developed various market
monitoring reports. The reports are scrutinized to ascertain whether there is
excessive purchase or sale position build up compared to the normal business of the
Member, whether there are concentrated purchases or sales, or whether the
purchases have been made by inactive or financially weak Members. Even the
quality of Securities is considered to assess the quality of exposure. Based on an
analysis of the above factors and the margins already paid and the capital deposited
by the Member, early pay-in calls are made, if required. Some Members are even
advised to reduce their outstanding exposure in the market. Trading restrictions are
placed on financially weak Members as and when deemed fit after taking into
consideration their past track record. The Department, as such, executes an
important risk management function to avert possible payment default of Members
by
taking
timely
and
corrective
measures.
Market

Wide

Circuit

Breakers

Based on SEBI Circular No. SMDRPD/Policy/Cir-37/2001 dated June 28, 2001, the
Exchange implemented index-based market-wide circuit breakers with effect from
July 02, 2001. SEBI vide its Circular no. CIR/MRD/DP/ 25 /2013 dated September
03, 2013 has partially modified the provisions of the it aforementioned circular and
have introduced daily calculation of circuit breaker limits for 10%, 15% and 20%
based on the previous day's closing level of the index. Additionally, a 15 minutes pre
opening
session
post
each
trading
halt
has
been
introduced.
Based on the said circular, the Exchange on a daily basis disseminates the 10%,
15% and 20% circuit breaker limits on the closing value of S & P BSE Sensex for the
next trading day. The rounding off the circuit breaker limits to nearest 25 points as
prescribed in SEBI circular dated June 28, 2001 has been done away with SEBI
Circular
dated
September
3,
2013.
The index-based market-wide circuit breaker system applies at 3 stages of the index
movement, either way viz. at 10%, 15% and 20%. These circuit breakers when
triggered bring about a coordinated trading halt in all equity and equity derivative
markets nationwide. The market-wide circuit breakers are triggered by movement of
either the S & P BSE Sensex or the NSE CNX Nifty, whichever is breached earlier.
The trigger limits and the respective halt duration is given below:

Trigger
Limit

Trigger Time

10%

Before 1 Pm
At or After 1 PM to
2.30 PM
At or after 2.30 PM
Before 1 PM

15%

At or after 1 PM
before 2 PM On or
after 2 PM

20%

Any time of the day

Individual

Security

Pre Opening
Session duration
post each halt

Halt duration
45 Minutes
15 Minutes
No Halt
1 Hour 45 minutes
45 Minutes
Trading halt for the
remainder of the
day.
Trading halt for the
remainder of the
day.

15 Minutes
15 Minutes
15 Minutes
15 Minutes
-

Circuit

Filters

Circuit Filter of 20% is applicable on all Securities except the Securities on which
derivative products are available and are part of indices on which derivative products
are available. However, BSE imposes dummy circuit filter on these Securities to
avoid punching errors, if any.