Exchanges announce relief on ESM framework for small and micro-caps

The changes have been announced for companies placed under Stage II of the framework and will be effective from July 24

The National Stock Exchange (NSE) and BSE on Tuesday announced revisions in the controversial Enhanced Surveillance Measures (ESM) framework, which was introduced last month to curb volatility and possible manipulation in small and micro-cap companies with a market cap of less than Rs. 500 crore.

The changes were announced for companies placed under Stage II of the framework and will be effective from July 24.

Stocks of companies placed under stage II ESM were permitted to be traded only once a week with period call action.

In a major relief, trading has now been permitted on all trading days within the 2 per cent price band and with 100 per cent margin requirement. 

However, no change has been announced for companies in Stage I.

The exchanges said that in a joint discussion with the Securities and Exchange Board of India (Sebi), the current surveillance actions under the ESM framework have been reviewed.

The update comes after Mercury EV-Tech, a BSE-listed company with a market capitalisation of Rs. 420 crore, moved the Securities Appellate Tribunal (SAT) for relief against the new framework. 

The company said that placing them in stage II had rendered its scrip illiquid, causing a loss to the company and investors.

SAT will hear the matter on July 25.

Several other brokers and entities raised concerns over the issues and submitted requests to Sebi to address the challenges with the new framework.