The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) announced on Monday that stocks in the small and medium enterprises (SME) segment will come under the Additional Surveillance Measures (ASM) framework and trade-to-trade settlement.

The move is aimed at curbing speculative trading and reducing volatility in the SME space, which has seen increasing retail participation. The new frameworks will be made available by October 3, 2023.

According to separate circulars issued by the leading exchanges, the decision to extend the short-term ASM and trade-for-trade frameworks to SME stocks subject to certain changes came after a joint surveillance meeting of exchanges and market regulator Securities and Exchange Board of India (SEBI). 

If a stock falls under a certain basis, including high variation between high and low prices and variation in volumes as compared to the monthly average, it can be placed under additional surveillance measures and may also attract higher margin requirements.

Speculative trading is not allowed in the trade-for-trade (TFT) framework, and delivery of shares and payment of consideration amounts is mandatory. The exchanges said that the TFT framework will be in conjunction with all other prevailing surveillance measures being imposed.

Additionally, the circulars read that the shortlisting of securities under TFT is purely on account of market surveillance and should not be construed as an adverse action against the concerned company or entity.