What Are Surveillance Measures?

Surveillance measures are regulatory steps implemented by SEBI and stock exchanges to monitor trading activities across markets. These measures focus on safeguarding investors and traders from potential risks. 

Exchanges have mandated that brokers display cautionary notifications mentioning all the surveillance actions on the instrument when a client tries to place an order. 

These measures aim to enhance your awareness regarding your trades and ensure transparency. By understanding the alerts and terms presented, you can make informed decisions while adhering to regulatory guidelines.

Below is a list of terms derived for your better understanding:

GSM (Graded Surveillance Measure): This surveillance method is used by SEBI and exchanges to monitor and regulate securities trading. This method protects investors from potential risks and is often implemented in phases based on risk levels.

ASM (Additional Surveillance Measure): These are regulatory steps to monitor trading patterns in high-risk stocks to prevent excessive speculation and ensure market stability.

Insolvency Resolution Process (IRP): A legal process initiated when a company or an individual faces severe financial distress, aiming for restructuring or liquidation under regulatory supervision.

ICA (Inter-Creditor Agreement): An agreement among multiple lenders to collectively resolve financial stress in a company, ensuring a streamlined approach for recovering debt. 

Pledge: Pledge refers to shares held as collateral by a lender. If the borrower fails to meet obligations, the pledged shares might be at risk.

ESM (Enhanced Surveillance Measure): This measure is a stricter regulatory framework implemented to prevent speculative trading and maintain market integrity, applicable to high-risk stocks.

Loss-making: Refers to a company or stock consistently incurring financial losses over recent periods. This status can signal financial instability, so traders are advised to approach such stocks cautiously.

Overall Encumbered Share Exceeds 50%: This occurs when more than half of a company’s total shares are pledged or used as collateral. It indicates a high dependency on borrowed capital, which might affect the company’s financial flexibility and stability.

Under BZ/SZ Series: These series categorise stocks under additional regulatory scrutiny due to heightened risk factors, such as irregular trading patterns or lack of compliance. Stocks in these series are often moved to the Trade-to-Trade (T2T) segment, where every trade must result in delivery, restricting speculative and intraday trading.

Annual Listing Fee Not Paid: This indicates that the company has not paid the mandatory annual fee required to maintain its listing on the exchange. Non-compliance can result in delisting and is a red flag for potential investors.

Derivative Contracts Excluded from F&O: When derivative trading in a stock is phased out of Futures and Options, it indicates regulatory actions to control excessive speculation or risks associated with the scrip.

Scrip PE Ratio Above 50: The stock’s Price-to-Earnings ratio exceeds 50, based on its performance over the past four quarters. A high PE ratio might indicate overvaluation, making evaluating the stock’s fundamentals essential.

Zero EPS: The company’s Earnings Per Share (EPS) have been zero over the last four quarters. This signifies that the company has not generated any profit to attribute to shareholders, which can be a warning sign for investors.

Less than 100 Unique PANs Traded: Fewer than 100 distinct Permanent Account Numbers (PANs) have traded in the stock over the past 30 days. Low participation indicates limited interest or liquidity, which could increase trading risks.

The mandatory market-making period is over. Market-making ensures liquidity for SME (Small and Medium Enterprise) stocks. The conclusion of this period means that stock trades may now face lower liquidity or higher volatility.

SME Scrip Not Regularly Traded: Refers to an SME stock with infrequent trading activity. Such stocks might experience significant price fluctuations and limited market depth, posing higher risks to investors.

Close-to-Close Price Movement: Close-to-Close Price Movement refers to the percentage change in a stock’s closing price over a specific period.

Close-to-Close Price Movement (25% in 5 Days): This highlights that the stock price has increased or decreased by more than 25% over the past five trading days. Such rapid movements suggest heightened volatility and potential speculation.

Close-to-Close Price Movement (40% in 15 Days): Indicates a price fluctuation exceeding 40% over the previous 15 trading days. These changes demand caution, as they often reflect speculative activity or news-driven impacts.

Close-to-Close Price Movement (100% in 60 Days): The stock’s price has doubled in the past 60 trading days. While this may indicate strong momentum, it also requires a thorough evaluation of underlying reasons to avoid undue risks.

Close-to-Close Price Movement (25% in 15 Days): A price movement greater than 25% over the last 15 trading days. Such changes warrant careful analysis of the stock’s fundamentals and market sentiment.

Close-to-Close Price Movement (50% in 1 Month): This represents a price change exceeding 50% within the last month. Significant fluctuations like this can indicate speculative trading or fundamental shifts.

Close-to-Close Price Movement (90% in 3 Months): Highlights a price increase or decrease exceeding 90% in the last three months. Investors should investigate the reasons behind such moves before trading.

Close-to-Close Price Movement (25% in 1 Month): This indicates a price change of more than 25% over the last month. It could reflect high market optimism or speculative activities.

Close-to-Close Price Movement (50% in 3 Months): A price fluctuation exceeding 50% over the past three months may signal volatility or significant market interest.

Close-to-Close Price Movement (200% in 1 Year): The stock’s price has risen by over 200% in one year. While this growth may appear promising, understanding the sustainability of such performance is crucial.

Close-to-Close Price Movement (75% in 6 Months): A change surpassing 75% within six months, often requiring closer scrutiny to identify the causes of such significant shifts.

Close-to-Close Price Movement (100% in 1 Year): Indicates a doubling of the stock’s price over the past year, necessitating a review of the factors contributing to this performance.

High-Low Price Variation: This term refers to the percentage difference between a stock’s highest and lowest prices within a specified period. It indicates volatility, helping you understand how much a stock’s price fluctuated during that timeframe.

High-Low Price Variation (75% in 1 Month): The difference between the highest and lowest prices exceeds 75% within a month, indicating significant volatility.

High-Low Price Variation (150% in 3 Months): A more than 150% variation over three months, reflecting heightened market activity or speculative interest.

High-Low Price Variation (75% in 3 Months): This represents a significant price difference over three months, exceeding 75%, often warranting caution in trading decisions.

High-Low Price Variation (300% in 1 Year): The highest and lowest price difference is over 300% in one year, suggesting substantial price swings.

High-Low Price Variation (100% in 6 Months): This indicates a 100% difference between the highest and lowest prices within six months, indicative of high volatility.

High-Low Price Variation (200% in 1 Year): A 200% price variation in one year, often associated with speculative trades or significant market shifts.

High-Low Price Variation (150% in 12 Months): Price changes exceeding 150% in one year may indicate underlying volatility or significant market events.