SMDRP/POLICY/Cir-19/2000

SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, A Wing, Gr. Floor,
224, Nariman Point, Mumbai 400 021 

To

The Executive Directors/ Presidents and
Managing Directors of all the exchanges

Sir/Madam,

The Group on Risk Management in Equity Markets met on April 26, 2000 to discuss the risk containment measures and the following decisions were taken:

1. SEBI had earlier decided in the meeting of the Inter-Exchange Surveillance Group (ISG) held on January 14, 2000 and communicated vide letter no. IES/LKS/208/2000 dated January 18, 2000, that price bands for the top 100 scrips shall be relaxed. However, the same could not be implemented, as the necessary software changes were required to be made by the stock exchanges. The Group on Risk Management also discussed the issue of relaxation to the existing price bands to give greater flexibility to the investors and agreed that the relaxation in the price bands as communicated earlier should be implemented for 200 scrips. The system of relaxation in the price bands would be applicable from May 02, 2000. The list of the 200 scrips is enclosed.
   1. Once a scrip touches the 8% price band in either direction, the trading in that scrip would be restricted upto the price band for half an hour. After half an hour, the price band would be further relaxed by 4% in that direction only.
   2. The relaxation of the price band can only be done at BSE or NSE. The other Exchanges would relax the price band (by 4%) only after such relaxation is applied at BSE or NSE.
   3. The Exchange (BSE or NSE) where the price band in any of the 200 scrips is hit first, would communicate such information to the other Exchanges including by email so that the relaxation of price band could also be undertaken by the other Exchanges. The information would also be communicated through PTI and Reuters.
   4. In case the price band is hit on either side in the last half an hour of trading, then the trading in that scrip would be restricted up to the price band for fifteen minutes instead of half an hour. After fifteen minutes, the price band would be further relaxed by 4% in that direction only.


The details of the manner of the relaxation of circuit filters are given below:
 

1. It has been decided that the short seller who does not either own share or has not borrowed shares (which in that case shall be deposited with the clearing corporation/clearing house) the carry forward charges shall not be payable to the short seller. These carry forward charges will be credited by the stock exchange to its Investors’ Protection Fund. This would be implemented by the exchanges having the carry forward facility for settlements ending after May31, 2000.

You are advised to take steps to give effect to these decision.
 
 

Yours faithfully,
 
 
 
 

P. K. BINDLISH
Division Chief
Secondary Market, Depository,
Research & Publications Department
e-mail : pkb@sebi.gov.in

Encl: as above