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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 scrip in the absence of any meaningful
By taking timely actions to manage default risk.
The surveillance activities at BSE are allocated to three Cells:
Price Monitoring: is mainly related to the price movement/ abnormal fluctuation in prices
or volumes of any scrip
Investigations: conducting snap investigations/examinations/detailed investigations in
scrips 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 scrips traded at
BSE by taking surveillance actions like reduction of circuit filters, imposition of special
margin, transferring scrips on a trade-to-trade settlement basis, suspension of scrips/
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, scrips traded infrequently, scrips hitting new high/ low, scrips picked up for
rumour verification, etc.
The scrips 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 scrips 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 scrips 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 scrips on which derivative
products are available and scrips which are liquid and included in indices on which derivative
products are available. However, BSE imposes 10% dynamic circuit filter on these scrips to avoid
punching errors, if any.
Circuit Filter of 20 % is applicable on other scrips which are not included in the above-mentioned
If a scrip is shifted for settlement on Trade-to-Trade basis, selling/ buying of shares in that scrip
results into giving/ taking delivery of shares at the gross level and no intra day netting off/ square
off facility is permitted. The scrips which form part of the 'Z group' are compulsorily settled on a
trade-to-trade basis.
As a part of Surveillance measure the Exchange transfers various scrips for settlement on a Tradeto-Trade basis. The said action is reviewed at periodic intervels (Fortnightly & Quarterly) 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 scrips to/fro for settlement on T2T basis are decided jointly by the stock
exchanges in consultation with SEBI and reviewed periodically. Scrips on which derivatives
products are available or scrips included in indices on which derivatives products are available are
not considered for transfer to Trade for Trade segment.
Dropping of Scrips
Newly listed scrips (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 shall be dropped till the time they
declare their first Quarterly results.
Scrips transferred out of T2T settlement to Rolling settlement as per quarterly T2T Review
Exercise will not be considered in immediate following fortnightly T2T review for shifting it back
to T2T.
Rumour 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.

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 scrip 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
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
scrips 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
The earlier Circuit Filters at individual scrip level used to restrict the movements of indices as

well. Now, there are no Circuit Filters on the scrips forming part of popular indices like SENSEX.
In order to contain huge price movements of index scrips, SEBI has mandated that Market Wide
Circuit Breakers (MWCB) which at 10-15-20% of the movements in either BSE SENSEX or
NSE Nifty whichever is breached earlier would be applicable. This would provide a cooling
period to the market participants and to assimilate and re-act to the market movements.
The trading halt on all stock exchanges would take place as under;
- In case of a 10% movement in either index, there will be a 1-hour market halt if the movement
takes place before 1:00 p.m. In case the movement takes place at or after 1 p.m. but before 2:30
p.m., there will be a trading halt for 1/2 hour. In case the movement takes place at or after 2:30
p.m., there will be no trading halt at the 10% level and the market will continue trading.
- In case of a 15% movement in either index, there will be a 2-hour market halt if the movement
takes place before 1:00 p.m. If the 15% trigger is reached on or after 1:00 p.m. but before 2 p.m.,
there will be a trading halt for 1 hour. If the 15% trigger is reached on or after 2:00 p.m., the
trading will halt for the remainder of the day.
- In case of a 20% movement in either index, the trading will halt for the remainder of the day.
The above percentage would be translated into absolute points of the Index variation on a
quarterly basis. These absolute points are revised at the end of each quarter
The Market Wide Circuit Breakers at a national level have been introduced in the Indian markets
for the first time. This is on the lines of the system prevailing in the US markets.
Individual Scrip Circuit Filters
Circuit Filter of 20% is applicable on all scrips except the scrips 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 scrips to avoid punching errors, if any.