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In summary
ASM (Additional Surveillance Measures) is a market surveillance framework used by SEBI and recognised stock exchanges to monitor stocks that display unusual volatility, sharp price movements, or abnormal trading activity. Stocks placed under ASM remain tradable but may be subject to additional restrictions and monitoring.
- Introduced in 2018 by SEBI and stock exchanges.
- ASM-listed stocks may attract 100% margin requirements in certain stages.
- ASM Stage 1 may impose a 5% or lower daily price band.
- ASM Stage 2 may move securities to a Trade-to-Trade settlement mechanism.
- The framework focuses on investor protection and market integrity.
- ASM inclusion does not indicate wrongdoing by a company.
- Exchanges periodically review ASM stocks and may continue, modify, or remove restrictions based on market behaviour.
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What is ASM (Additional Surveillance Measures)?
What is the additional surveillance measure (ASM)
ASM stands for Additional Surveillance Measures. It is a regulatory framework used by stock exchanges to closely monitor securities that display unusual price movements, trading volumes, or volatility.
The objective of ASM is to strengthen market surveillance, improve transparency, and reduce risks arising from excessive speculation or potential market manipulation.
Stocks placed under ASM appear on an ASM list maintained by stock exchanges. Inclusion in this list does not imply any adverse action against the company. Instead, it serves as a cautionary indicator for investors.
ASM stages and restrictions
| ASM Stage | Key Measures |
| Stage 1 | 100% margin requirement and daily price band of 5% or lower |
| Stage 2 | Trade-to-Trade settlement may be imposed, requiring delivery-based transactions |
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When does long-term ASM apply?
Long-term ASM applies to securities that satisfy surveillance criteria established by stock exchanges.
Key characteristics of long-term ASM
| Factor | Explanation |
| Selection criteria | Based on volatility, trading activity, market capitalisation, and other surveillance parameters |
| Monitoring period | Remains applicable for an extended duration |
| Regulations | May involve stricter margin and trading requirements |
| Risk mitigation | Helps reduce excessive price fluctuations |
| Market integrity | Supports fair and transparent trading |
| Investor awareness | Alerts investors about higher-risk securities |
| Review process | Subject to periodic exchange review |
- Selection of securities: Stocks demonstrating elevated volatility, unusual trading patterns, or increased susceptibility to manipulation may be considered for long-term ASM monitoring.
- Longer monitoring periods: Unlike short-term surveillance actions, long-term ASM remains in force until exchanges determine that market conditions no longer warrant additional monitoring.
- Stricter regulations: Selected securities may face higher margin requirements and additional trading restrictions.
- Mitigation of risks: The framework helps reduce excessive market speculation and limits abrupt price movements.
- Preserving market integrity: ASM assists exchanges in identifying and discouraging manipulative trading practices.
- Investor awareness: ASM alerts investors that additional caution may be required while evaluating affected securities.
- Periodic review: Stock exchanges regularly assess securities under ASM and decide whether restrictions should continue, change, or be withdrawn.
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How are ASM list stocks selected?
Stock exchanges evaluate multiple surveillance parameters before including a stock in the ASM list.
Criteria used to determine the ASM list stocks
| Criterion | What it measures |
| Close-to-close price variation | Daily changes in closing prices |
| Client concentration | Distribution of ownership among investors |
| Delivery percentage | Proportion of delivery-based trades |
| High-low variation | Intraday price volatility |
| Market capitalisation | The total market value of outstanding shares |
| Number of unique PANs | Breadth of investor participation |
| Price-to-earnings (P/E ratio) | Valuation relative to earnings |
| Volume variation | Changes in trading activity |
Securities generally excluded from ASM consideration
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What types of regulatory measures under ASM can be imposed?
The different types of regulatory measures under ASM can be categorized as follows:
1. Price bands
Under this type of ASM regulation, price limits are placed on securities to restrict their price movements within a specific range. Price bands work to prevent sudden price fluctuations and cap excessive volatility.
2. Higher margin requirements
Due to a higher margin requirement, investors have a larger financial stake in their trades. This lowers the risk of speculative trading and price manipulations.
3. Graded surveillance measure
Commonly known as GSM, Graded Surveillance Measure classifies securities on the basis of their risk profiles. Surveillance measures are applied in a graded manner depending on the risk category of the security.
4. Additional disclosure obligations
These additional obligations require certain stocks on the ASM list to make add-on information available to the stock exchange and investors, ensuring greater transparency.
5. Trading restrictions
Some securities that are listed under ASM in the stock market may have additional trading restrictions. These restrictions can include intraday trading limits, limits/restrictions on short selling, and minimum holding period mandates.
6. Enhanced monitoring
Securities placed under enhanced monitoring are closely monitored by the stock exchange to detect any suspicious activities. Generally, stock exchanges scrutinise everything about the security, including its trading volumes, market-related data, order flows, etc.
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What are the ASM stages?
These stages ensure that securities are closely monitored and regulated to prevent malpractices and promote transparent trading. The stages of ASM are as follows:
| Stage | Description |
| Stage 1 | Identifying securities that meet specific predefined criteria, such as unusual price movements or trading volumes. |
| Stage 2 | Imposing measures like price bands, increased margin requirements, and additional disclosures to mitigate risks. |
| Stage 3 | Continuously monitoring and reviewing identified securities to ensure compliance and detect emerging issues. |
| Stage 4 | Modifying or lifting measures based on the securities' performance and market conditions. |
| Stage 5 | Ongoing monitoring and adjusting of measures to maintain market stability and investor protection. |
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How does ASM affect investors?
As an investor, ASM can significantly influence your trading experience in the following way:
1. Restriction of speculative trading
Stricter trading measures, such as heightened margin requirements and price bands, make speculative trades more expensive. This forces traders and investors to adopt a more prudent approach to investment decisions, often necessitating thorough analysis before trading.
2. Enhanced market stability
By curbing excessive price fluctuations and speculative trading, ASM contributes to a more stable market. This stability is advantageous for long-term investors who prefer predictable market conditions for making well-informed investment decisions.
3. Stock liquidity effects
While ASM aims to protect investors from sudden price swings, it may inadvertently reduce liquidity for the monitored shares. This could impact the ability of investors to execute large transactions swiftly without causing significant market movements.
4. Investor sentiment and confidence
When investors observe regulatory bodies actively working to prevent market manipulation, their confidence is bolstered. This positive sentiment can attract more market participants, fostering a dynamic trading environment. However, the designation of a stock as being under ASM might send negative signals, deterring some potential buyers from investing in those stocks.
5. Increased margin requirements
Stocks under ASM typically require a higher margin to trade. This means you may need to deposit more funds upfront, raising your investment costs and potentially reducing your profit margins or returns.
Upcoming IPO
Mainboard
SME
Aarvee Engineering Consultants Limited
Bidding
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be announced
Price
To be announced
Aastha Spintex Limited
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be announced
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Absolute Project India Limited
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be announced
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AceVector Limited
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be announced
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Adroit Industries India Limited
Bidding
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be announced
Price
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What investment strategies can be used for ASM stocks?
Investors may consider structured risk-management approaches when evaluating ASM-listed securities.
Investment strategies under ASM
| Strategy | Purpose |
| Diversification | Reduce concentration risk |
| Risk management | Control downside exposure |
| Long-term focus | Reduce impact of short-term volatility |
| Professional advice | Improve decision-making |
- Diversification: Spreading investments across multiple asset classes can reduce the effect of volatility in ASM-listed stocks.
- Risk management: Investors may use stop-loss orders and periodically review portfolio risks.
- Long-term focus: A longer investment horizon may help reduce the impact of short-term market fluctuations.
- Professional advice: Qualified financial advisors can help investors understand regulatory developments and associated risks.
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Conclusion
Stocks placed under ASM are subject to additional monitoring and stricter trading requirements. Depending on the surveillance stage, investors may face measures such as 100% margin requirements, Trade-to-Trade settlement, and 5% circuit filters.
The ASM framework helps stock exchanges identify unusual market activity, maintain market integrity, and improve investor protection. While ASM-listed stocks remain tradable, investors should carefully assess the risks associated with these securities before making investment decisions.
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Frequently Asked Questions
Additional Surveillance Measures
What is the additional surveillance measure?
Is it good to buy ASM listed stock?
Buying ASM-listed stocks carries higher risk due to their volatile behaviour or irregular trading patterns. It's essential to assess your risk tolerance, conduct in-depth research, and make informed decisions before investing in such stocks.
What happens if stock is in ASM list?
When a stock is on the ASM list, it is subject to enhanced surveillance and tighter trading restrictions. While this helps reduce price manipulation and supports risk control, it may also lower liquidity and limit short-term trading flexibility for investors.
What is a long-term ASM?
Long-term ASM securities are selected on the basis of set criteria, such as high-low price variation, average daily volume, market capitalisation, and concentration of top clients within a given time frame. Stocks in the long-term ASM list are eligible for a staged exit after 90 days.
Can I sell ASM stage 1 stock?
Yes. The sale of ASM stage 1 stock is considered a normal sale through your Demat account.
Disclaimer
Standard Disclaimer
Investments in the securities market are subject to market risk, read all related documents carefully before investing.
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