What is the ASM/GSM list? How does it affect TM Investors?

 ASM & GSM are important measures that SEBI has adopted for investor’s safety. It is important for investors to know how these protective measures work in their favor.

SEBI and stock exchanges, to enhance market integrity and safeguard investors, have introduced Additional Surveillance Measures (ASM) on securities.

As on 19-02-2021, 120 stocks are under the long-term list of ASM and 41 stocks under the short-term list. Shortlisting of securities for placing in ASM is based on the following parameters:

1. High Low Variation

2. Client Concentration

3. Close to Close Price Variation

4. Market Capitalization

5. Volume Variation

6. Delivery Percentage

7. No. of Unique PANs

8. PE

ASM is good for investors as SEBI would thoroughly verify any unexpected price movement in a stock. It will control speculative activities and reduce the possibility of any malpractice.

How ASM works?

 Stock Exchange has introduced ASM mainly for controlling Speculation (Trading) in the stock. ASM includes 2 basic points:

1. Circuit Filter 5%

2. 100% margin on open positions of stocks

Being in ASM will put restrictions on intraday trading in these stocks. More importantly, it will be mandatory for brokers to keep 100% margin on these stocks as against 35% OR 40% in the usual case. It effectively means that margin trading will be disabled in these stocks. However, these stocks will be available for buying under the cash segment.

Such curbs will discourage speculators and intra-day traders from taking heavy positions in stocks. It is often that flight of such traders leads to liquidity evaporating, causing stock prices to drop. Now, with these restrictions, unstable traders will not be able to take out a huge chunk of money at one go. It in turn will lend stability to stock price.

The companies can get in and out of the list based on the review conducted by exchanges every 2 months.

What is Graded Surveillance Measure (GSM)?

GSM is a system designed by SEBI to keep a check on shares that see an abnormal price movement – out of sync with its financial health or fundamentals.

These companies are often characterized as penny stocks. They are illiquid, have a negligible market cap, and poor fundamentals. Such securities are often vulnerable to financial misconduct. Read more about what is asm and gsm in stock market