Manual Check On New Bands

Sebi has asked the National and Bombay Stock Exchanges to monitor the proposed relaxation in price bands from 8 per cent to 12 per cent on a manual basis till the software for monitoring the change electronically is ready.

The regulator has also kicked off discussions with leading exchanges to work out a shorter volatility margin model, which would measure volatility on a weekly or fortnightly basis rather than the current six-week period.

Sebi on Friday asked senior BSE and NSE officials to see whether they could enforce the new price bands, which call for a 4 per cent relaxation after a 30 minute cooling-off period, at the earliest. A target of one week has been set for enforcing the bands.

The move to relax price bands with regard to the top 100 scrips was initiated by the regulator over a month back.

The relaxation was to have come into effect from January 24 but exchanges could not be ready with their software to monitor the change through the automated surveillance system. The exchanges said that it could take them sometime to make changes to the software. As Sebi was keen to have exchanges monitor the new bands electronically, it did not press the exchanges and allowed to defer the implementation. In fact, even at Monday's meeting with top stock exchanges to review the recent volatility in the markets, Sebi officials were told that the software would take some more time. Although, the regulator was not happy with the delay it went along with the exchanges. But off-late there has been concern that the threat is not in terms of not having adequate margins in place, but to ensure that an exit route can be provided to investors in the event of an equally sharp fall, failing which there could be trouble.