Why am I not allowed to trade GSM stage 2 and above stocks?

Securities and Exchange Board of India (SEBI) and Exchanges, in order to enhance market integrity and safeguard interest of investors, have been introducing various enhanced pre-emptive surveillance measures such as reduction in price band, periodic call auction and transfer of securities to Trade for Trade segment from time to time.

The main objective of these measures are to;

• Alert and advice investors to be extra cautious while dealing in these securities and

• Advice market participants to carry out necessary due diligence while dealing in these securities.

In continuation to various surveillance measures already implemented, SEBI and Exchanges, pursuant to discussions in joint surveillance meetings, have decided that along with the aforesaid measures there shall be additional Graded Surveillance Measures on securities with price not commensurate with financial health and fundamentals like Earnings, Book value, Fixed assets, Net-worth, P/E multiple, Market Capitalisation etc.

There are six stages of Surveillance Actions under GSM:

1. Transfer to Trade for Trade with a price band of 5% or lower as applicable.
2. Trade for Trade with price band of 5% or lower as applicable and Additional Surveillance Deposit (ASD) of 100% of trade value to be collected from Buyers.
3. Trading permitted once a week (Every Monday) and ASD of 100% of trade value to be deposited by the buyers.
4. Trading permitted once a week (Every Monday) with ASD of 200% of trade value to be deposited by the buyers.
5. Trading permitted once a month (First Monday of the month) with ASD of 200% of trade value to be deposited by the buyers.
6. Trading permitted once a month (First Monday of the month) with no upward movement in price of the security with ASD of 200% of trade value to be deposited by the buyers.

Further, Additional Surveillance Deposit(ASD) shall be paid only in form of cash and shall be retained until further notice by the Exchange.

Since Stage II and above stocks require Additional Surveillance Deposit of 100% of the Trade Value or above, which will remain blocked by the Exchange until further notice, even after exiting the position, we do not allow trading in stocks which are at Stage II or above of the GSM framework.

You can find this list of securities on NSE & BSEs website.

Alternatively you can also find the NSE list and BSE list of GSM stocks here.

To know more about GSM, click here