NSE announces ASM and T2T framework for SME stocks

National Stock Exchange on Monday announced that stocks in the small and medium enterprises (SME) segment shall be brought under the framework of Additional Surveillance Measure (ASM) and Trade-to-Trade (T2T) settlement. The move was necessitated after SEBI and stock exchanges took note of alleged manipulation, high speculation in SME stocks.

Scrips are placed under ASM if they fall under certain criteria including severe variation between high and low prices and variation in volumes versus the monthly average, and they invite higher margin requirements and T2T settlement. Scrips moved to T2T settlement can be only bought and sold for delivery and they will not be available for intra-day trading.

"As per Joint Surveillance Meeting of Exchanges and SEBI, the extant Trade for Trade (TFT) Framework shall be extended to Small and Medium Enterprises (SME) stocks subject to certain changes," said NSE in a press release.

"Market participants may note that TFT framework shall be in conjunction with all other prevailing surveillance measures being imposed by the Exchanges from time to time. Further, it may also be noted that the shortlisting of securities under TFT is purely on account of market surveillance, and it should not be construed as an adverse action against the concerned company / entity," added NSE.

SME stocks are traded in lots only, which means you can't buy one or two shares. You have to buy in lots. Lot size is different for different SMEs(like 500, 1,000 etc). There are 2 types of exchange for SME listing: NSE Emerge and BSE SME. After a SME stock satisfies some criteria , it can choose to move to mainboard . Then lot size restriction is removed, which mean you can buy one share also. 

The process of identifying the stocks moving to Trade for Trade segment shall be on a fortnightly basis and stocks moving to/from Trade to Trade shall be on a quarterly basis, said NSE on Monday.

Criteria for TFT Fortnightly Review:

1. Price Earnings Multiple (P/E) less than or equal to 0 OR greater than or equal to upper limit subject to a minimum of 25 as on the relevant date (i.e., end date of relevant fortnightly review period).
2. Fortnightly Price Variation is greater than or equal to 25% plus Nifty 500/ S&P BSE 500 Index Variation subject to a minimum of 10%.
3. Market Capitalisation less than or equal to Rs 100 crore as on relevant date (i.e. end date of relevant fortnightly review period).

Criteria for TFT Quarterly:

Criteria A
1. Price Earnings Multiple (P/E) less than or equal to 0 OR greater than or equal to upper limit subject to a minimum of 25 as on the relevant date ( i.e. end date of relevant quarterly review period).

2. Price Variation greater than or equal to 25% plus Nifty 500/ S&P BSE 500 Index variation in the last 2 fortnights; subject to a minimum of 10%

3. Volatility greater than three times Nifty 50/ S&P BSE SENSEX volatility over a period of 6 fortnights. Volatility is computed as standard deviation of log normal close to close returns.

Criteria B
1. Price Earnings Multiple (P/E) greater than 0 but less than the upper limit subject to a minimum of 25 as on the relevant date ( i.e. end date of relevant quarterly review period). 

2. Price Variation greater than or equal to 50% plus Nifty 500/ S&P BSE 500 Index variation in the last two Fortnights.

3. Volatility greater than three times Nifty 50/S&P BSE SENSEX volatility over a period of 6 Fortnights. Volatility is computed as standard deviation of log normal close to close returns.

Criteria C
1. Market capitalisation of less than Rs 100 crore.

2. Average daily volume variation for 2 Fortnights over previous 2 Fortnights greater than 200% + Average volume variation of Nifty 500/ S&P BSE 500 Index constituents, subject to minimum of 200% (average daily volume in the recent 2 Fortnights being more than 1,000 shares)

3. Concentration (Gross Purchase plus Gross Sales) of Top 10 Clients on the basis of PAN during the 2 Fortnights more than 25% (Concentration excluding market makers shall be considered)

4. Price Variation greater than or equal to 25% plus Nifty 500/ S&P BSE 500 Index variation in the last 2 Fortnights, subject to a minimum of 10%.