What is ASM framework in stock market and how it affects traders? Explained

ASM framework stock market, NSE, BSE: The National Stock Exchange has placed three Adani Group stocks -- Adani Enterprises, Adani Power and Adani Wilmar under the short-term additional surveillance measure (ST-ASM) framework Stage 1 to check short selling, effective from Thursday, March 9.

The development came after NSE removed Adani Enterprises from the surveillance just the earlier day, after remaining under observation for nearly a month’s time.

It means that intraday trading will require a 100 per cent upfront margin. When a stock is placed under the ASM framework, traders are not allowed to avail intraday leverage and their 100 per cent traded value gets blocked as margin. This is done to check risky and speculative trades, thus minimising the loss. 

Additional Surveillance Measure 

ASM is part of the Securities and Exchange Board of India (SEBI) and the Exchanges initiative to enhance market integrity and safeguard the interest of investors. ASM concerns are based on objective parameters with price, volume variation, volatility etc on Thursday.

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Stocks that are shortlisted for inclusion in the ASM list serve as a warning to investors about unusual price movement. Certain trading restrictions are implemented to put an end to any potential conjecture in the future.

Following are 2 sections of Additional margins -

1. Long-term additional surveillance measures

2. Short-term additional surveillance measures

As per NSE, the shortlisting of securities for placing in ASM is based on an objective criterion as jointly decided by SEBI and Exchanges covering the following parameters:

• High Low Variation
• Client Concentration
• Close to Close Price Variation
• Market Capitalization
• Volume Variation
• Delivery Percentage
• No. of Unique PANs
• PE

Besides, SEBI and the exchanges introduce various enhanced pre-emptive surveillance measures such as reduction in price band, periodic call auctions and transfer of securities to trade for trade segment from time to time.

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