Sebi, stock bourses revamp rules for trade-for-trade segment

As per the new norms, the market regulator will review the shifting of scrips on monthly basis

Revamping decade-old surveillance norms in the capital markets, Sebi and stock exchanges have revised the criteria with respect to decision on securities to be put under the restricted trading category.

As per the new norms, the capital market watchdog and the bourses would review the shifting of scrips into and out of trade-for-trade (TFT) segment on monthly basis as against the current practice of doing it every fortnight.

Transfer of scrips for trading and settlement under TFT category are reviewed as part of surveillance action to ensure market safety and safeguard investors' interest.

These measures are taken after joint consultation between the Securities and Exchange Board of India (Sebi) and the exchanges including the BSE and the NSE.

"The criterion for moving in/out of trade to trade has been formulated over 10 years ago and it was felt that there is a need to review the criterion so as to align with the current market dynamics," the NSE and the BSE said in similar-worded circulars.

"Therefore Sebi and stock exchanges after deliberation and discussions have decided to revise the criterion and periodicity for trade to trade activity," they added.

Moreover, as per the new norms, price variation in eligible stocks would be compared to the price variation observed in their respective sectoral index of the industry or those noted in a broader based market index.

In the case a particular sectoral index is available only on one exchange, the other bourse would also use the same to compare price variation in scrips of the concerned sector for the purpose of shifting to TFT segment.

According to the exchanges, adoption of sectoral indices for comparing price variation in scrips would be implemented with effect from June 30, 2014.

Besides, the securities trading under a 5% price band for a period of at least 22 trading days, as on the review date, would be eligible for shifting to TFT segment. This rule would be applicable from August.

"Accordingly, the review process for upward revision of price bands shall be aligned with monthly trade to trade activity," the exchanges said.

Additionally, stocks moving out of TFT segment would be placed under 5% price band until the next review for upward revision of price bands, as per the new criteria.

A calendar detailing the dates for reviewing scrips to be shifted into and out of TFT segment would be disseminated along with the next trade-to-trade review scheduled in August 2014, the circulars said.

"The date for August 2014 review will be intimated in due course," it added.