ESM framework revised by SEBI

19 Jul 2023 , 10:47 AM

The Enhanced Surveillance Measure (ESM) framework is still in place for dealing in equities, but the Securities and Exchange Board of India (SEBI), along with NSE and BSE, opted to relax one of the requirements on Tuesday.

Stocks were only permitted to trade once per week under the terms of the ESM framework as it was then. The exchanges stated in a circular that this has now been changed to apply to all trading days. Exchanges will start allowing trading on all days with a +/- 2% price band on July 24, 2023. The exchanges stated that the 100% margin requirement still applies. 

Exchanges will permit T2T settlement with a 100% margin under the updated ESM policy. Trading used to be allowed once every week via Periodic Call Auctions.

The exchanges also stated that no other ESM framework rules have been altered.

Days after Mercury EV Tech, a company listed on the BSE, filed a securities appeal to dispute the ESM framework, the new framework was released.

The ESM framework was unveiled last month for ‘micro-small’ businesses that experience severe volatility. These businesses have a market worth of under Rs 500 crore. According to SEBI, the criteria utilized to shortlist stocks under this framework include high-low price variance and close-to-close price variation.

Under the ESM framework, there are two stages.

In Stage-I, a trade-for-trade mechanism with a 5% or 2% price band settles the trading of the securities. Stage I is unchanged.

The current monitoring operation only allows trading once a week under Stage II. All trading days will now be subject to periodic call auctions with trade-for-trade settlements and a 2% price band.

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