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Understanding ASM and GSM: Safeguards in the Stock Market- Part 1

The stock market is a dynamic and often unpredictable environment, where investors buy and sell shares of publicly traded companies. To maintain fairness and transparency in trading, stock exchanges have implemented various mechanisms, including the Additional Surveillance Measure (ASM) and the Graded Surveillance Measure (GSM). In this article, we'll explore these safeguards.

  • What is ASM (Additional Surveillance Measure)?

ASM is a regulatory tool employed by stock exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) in India. Its primary purpose is to keep a close watch on securities that exhibit unusual price volatility or trading volumes. When a stock is placed under ASM, it faces certain restrictions to prevent market manipulation and protect investors.

Key Points about ASM:

1. Trigger Criteria: Stocks are placed under ASM based on predefined criteria, which may include significant price movements or trading volumes exceeding certain thresholds.

2. Trading Restrictions: Once a stock is under ASM, trading in it becomes subject to additional measures. For instance, intraday trading margins may be higher, and traders may not be allowed to carry forward positions to the next trading day.

3. Regular Review: ASM classifications are reviewed periodically, and stocks can be moved in and out of ASM based on their compliance with regulatory norms.

  • What is GSM (Graded Surveillance Measure)?

GSM is a similar surveillance mechanism, but it is used to address concerns related to market integrity and safeguard against speculative and manipulative trading practices. It categorizes stocks into different levels or grades based on their susceptibility to manipulation.

Key Points about GSM:

1. Graded Levels: GSM classifies stocks into various levels, with higher levels indicating a higher degree of surveillance. The levels include GSM Stage I, II, III, and IV.

2. Restrictions Vary: Depending on the GSM stage, trading restrictions and surveillance increase. Stocks in higher GSM stages may have stricter trading limits and surveillance.

3. Objective Assessment: Stocks are assigned GSM stages based on a thorough evaluation of their trading behavior, corporate governance, and adherence to regulatory norms.

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Disclaimer: Above content purely for educational purpose, do your own research before taking any position.

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