SEBI may extend the scope of surveillance under its ASM framework

Subject :Economy

Section: Capital Market

In News: SEBI may bring the equity derivatives segment under long-term additional surveillance measures (ASM).

Key Points:

SEBI has already mandated stockbrokers to display ‘risk disclosures’ for F&O clients.
SEBI is now planning to put the equity derivatives segment under long-term additional surveillance measures (ASM).

What are the additional surveillance measures (ASM)?

ASM framework already exists for the equity markets, and it protects investor interest by placing scrips under restriction to prevent market speculation and manipulations.
The stocks are moved to the ASM category based on certain criteria.

Why the need to place F&O under ASM?

Recently, an expert panel set up by the Supreme Court had observed that the element of human discretion in surveillance actions should be done away with, as far as possible and inclusion of stock-specific derivatives must be automatic and machine-based.
SEBI has been trying to protect investors in the derivative market after a recent study found that 9 out of 10 individual traders were making losses in the F&O segment.

F&O present system:
- The existing mechanism relating to the recommendations for inclusion of stocks into F&O is completely data driven, based on objective criteria, market matrix and action taken report of the entity.
- Derivative contracts on stocks can be traded on recognised stock exchanges only if the underlying stocks satisfy certain objective criteria.
- SEBI also takes into account other factors such as surveillance concerns, and ongoing investigations while granting approval for the inclusion of stocks in the equity derivative segment.