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Thursday, September 23, 2021

To curb manipulation, BSE levies add-on price bands to small caps

For the stock to be put under watch, they need to have moved either six times in the last six months or 12 times in as many months or 20 times in two years or 30 times in three years.

By: ENS Economic Bureau | Mumbai |
August 12, 2021 3:01:47 am
As per the report, markets regard them as ‘concept stocks’ because they flout the existing conventions — they have neither made profits nor issued any guidance on ever getting to profitability. (File Image)

With price manipulation becoming rampant in small-cap stocks, the BSE has levied additional curbs on securities exclusively listed on its platform with market cap of less than Rs 1,000 crore. The curbs will cover only scrips that are part of X, XT, Z, ZP, ZY and Y groups and quote at more than Rs 10 per share and with a market capitalisation of less than Rs 1,000 crore.

Under the new rule, the exchange has capped the upside and the downside for a stock during a particular time period. The directive coincided with a decline in the small and midcap stock, stoking fears that investors and traders were panic selling on account of the circular.

The add-on price bands will be in addition to the applicable daily price bands of such securities. A security placed in add-on price band will remain in the framework for a minimum period of 30 calendar days and will be eligible to move out if it does not qualify the provisions of the above framework thereafter. Price manipulation is small stocks are mostly unnoticed and several penny stocks were recently manipulated by traders for gains in the ongoing bull run, said an analyst.

For the stock to be put under watch, they need to have moved either six times in the last six months or 12 times in as many months or 20 times in two years or 30 times in three years.

The new framework will be in addition to all other prevailing surveillance measures being imposed by the exchanges from time to time, the BSE said. The new rules will come into effect from August 23, 2021.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said, “BSE’s new surveillance framework with add-on price bands for specified stocks listed exclusively on BSE is a timely initiative to curb excessive speculative activity in these stocks.”

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