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[ Source: Extracted from Website of BSE - www.bseindia.com ]
BSE - The Stock Exchange, Mumbai - Trading & Settlement Procedure
Surveillance at BSE Contd
Trade to Trade
If a scrip is shifted on a Trade-to trade settlement basis, selling/ buying of shares in that scrip would result into giving/ taking delivery of shares at the gross level and no intra day/ settlement netting off/ square off facility would be permitted. The scrips which form part of 'Z group' are compulsorily settled on a trade to trade settlement basis. In addition to that Surveillance department transfers various scrips from time to time on a trade to trade settlement basis to contain the excessive volatility and / or abnormal volumes in the scrip.
Suspension of a scrip
The scrips are suspended by the Surveillance department in exceptional cases pending investigation or if the same scrip is suspended by any other Stock Exchange as a Surveillance action.
Warning to Members
The department may issue verbal/ written warning to member/s when market manipulation in the scrip is suspected.
Imposition of penalty/ suspension/ de-activation of terminals
The department imposes penalty or deactivate BOLT terminals or suspend the member/s who are involved in market manipulation, based on the input/ evidence available from investigation report or as and when directed by SEBI.
Rumour Verification
The following steps are involved in Rumour verification process:
Surveillance Department liaises with Compliance Officers of companies to obtain comments of the company on various price sensitive corporate news items appearing in the selected New Papers. Comments received from the companies are disseminated to the Market by way of BOLT Ticker and/ or Notices in the Bulletin Show cause notices are issued to companies which do not reply promptly to the Exchange. Since November 1999, the Surveillance Department had verified with various company related rumours in approx. 3050 instances. Investigations based on rumour verifications are carried out, if required, to detect cases of suspected insider trading.
Pro-active Measures
The Department compiled and disseminated a list of companies who have changed their names to suggest that their business interest is in the software Industry. List of NBFC's, whose application for registration rejected by RBI, was compiled and disseminated by the department.
Position Monitoring
Statement of Top 100 Purchasers / Sellers Concentrated Purchases / Sales Purchases / Sales of Scrips having Thin Trading Trading in B1, B2 and Z group Scrips Pay-in liabilities above a Threshold Limit Verification of Institutional Trades Snap Investigation Market Intelligence
The Surveillance Department closely monitors outstanding exposure of members on a daily basis. For this purpose, it has developed various off-line and on-line market monitoring reports. The reports are scrutinised 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, whether the purchases have been made by inactive or financially weak members and even the quality of scrips is considered to assess the quality of exposure. Based on analysis of the above factors and the margins already paid and the capital deposited by the member, ad-hoc margins / 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 their business as and when deemed fit.
The department thus executes the Risk Management functions to avert possible payment default of members by taking timely corrective measures.
The following key areas are examined to assess the market risk involved.
Statement of Top 100 Purchasers/Sellers
Statements of top 100 net purchasers and top 100 net sellers in case of A, B1, B2 and Z group of scrips are scrutinized, on a daily basis. This enables the Department to keep a watch on the exposure of the members, ascertain the quality of exposures, measure the risk vis-a-vis cover available by way of margins, capital etc. and initiate action such as imposition of ad-hoc margins, trading restriction etc. on the members.
A detailed report on the net outstanding positions of top purchasers and top sellers with exposures in individual scrips above certain limit, margin cover available etc., is prepared on a daily basis. Concentrated Purchases/Sales
The concentration in purchases/sales of a member in a few scrips could be considered risky. In case, such a situation is noticed, fundamentals of the scrips, their daily turnover, their nature of transactions is ascertained. Thereafter, based on the market risk perception appropriate surveillance actions are taken.
Purchases/Sales of Scrips having Thin Trading
Purchases/sales by members in scrips having thin trading is closely scrutinised as comparatively high market risk is involved in trading in such scrips. Details of trades in such scrips are called from the members to assess the market risk involved and decide on the appropriate surveillance action. Trading in B1, B2 and Z Group Scrips
The Exchange has classified the scrips listed on the Exchange into 'A', 'B1', 'B2' and 'Z' groups. In view of the price manipulation witnessed in a few B1, B2 and Z group scrips and also as a risk management measure, the Exchange has prescribed Exposure limits in B1, B2 and Z group scrips in a single Rolling Settlement as given below:
Exposure limit in B1 group of securities in a single rolling settlement is given below:
| Permissible exposure limit in single scrip |
Applicable rate of margin |
| Upto Rs. 200 lakhs |
VAR margin |
| From Rs. 200 lakhs to Rs. 400 lakhs |
VAR margin + 25% Special Ad-hoc Margin |
Members wishing to take position in excess of Rs 400 lakhs are required to obtain prior permission of the Surveillance Department and are subjected to payment of additional margin, as may be prescribed.
Exposure limit in B2 group of securities in a single rolling settlement is given below:
| Permissible exposure limit in single scrip |
Applicable rate of margin |
| Upto Rs. 100 lakhs |
VAR margin |
| From Rs. 100 lakhs to Rs. 200 lakhs |
VAR margin + 25% Special Ad-hoc Margin |
Members wishing to take position in excess of Rs 200 lakhs are required to obtain prior permission of the Surveillance Department and are subjected to payment of additional margin, as may be prescribed.
Exposure limit in Z group of securities in a single rolling settlement is given below:
The members are not allowed to have net outstanding purchase or sale position beyond Rs. 25 lakhs in a single scrip and all 'Z' group scrips beyond Rs. 100 lakhs in a single Rolling Settlement.
The above limits are monitored on-line and exception reports are scrutinized for members exceeding the above limits. Pay-in Liabilities of Members above a Threshold Limit
The pay-in liability of members above a certain threshold limit is monitored with respect to the pay-in amount of the members, the members capital, the margin cover available to the Exchange against the members pay-in liability, etc. In case of inadequate margin cover, the reasons of the pay-in are ascertained. If warranted, advance pay-in is called to ensure that pay-in is completed smoothly. Verification of Institutional Trade
The institutional trades executed by the member-brokers are verified to ascertain the genuineness of trades. Snap Investigation
The Department also carries out, wherever considered necessary, preliminary investigation of certain dealings to verify irregularities. Further actions, viz., referring the case for detailed investigations, referring the cases to the Disciplinary Action Committee (DAC) of the Exchange for taking disciplinary action against members, referring cases to the Scrutiny Committee of the Exchange to re-assess the financial soundness of the members etc., are taken depending on the findings of preliminary investigation. Market Intelligence
The rumours floating in the market are verified with the data available with the Exchange. Newspapers, Television news channels and Reuters are referred to ascertain the national and global factors affecting the market sentiments. This enables the Exchange to avert market problems before it causes a serious damage.
On assessment of the market risk, decisions to call ad-hoc margins / early pay-in, advising the member to limit his business, summoning him for explanation, placing trading restriction, deactivation of BOLT TWS, etc. are taken.
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