BSE, NSE tweak rules to allow micro-cap stocks under ESM to trade on all days

In a boost for many smaller companies, exchanges decided, in consultation with market regulator SEBI on Tuesday, to lift trading restrictions on stocks that fall under Enhanced Monitoring Measures (ESM).

Earlier, shares listed under the second phase of the ESM were only allowed to be traded once a week. A post from the exchanges said this has now been revised to include all trading days.

It should be noted that the Mercury EV Tech, listed on the Bahrain Stock Exchange, was appealed last week under the Securities Court of Appeal.

BSE and NSE introduced an ESM framework for stocks with a market cap of less than ₹500 crore from June 5 to curb excess volatility.

Parameters for shortlisting securities under the ESM framework include high price variance and a price change close to the close.

Under this framework, the exchanges said, “…the trading of these securities will be settled through the trade-for-trade mechanism in a 5 percent or 2 percent price band (if the stock is already in the 2 percent band).”

For second-stage securities, trading will be settled through the trade-for-trade mechanism at a 2 percent price band. It said that the trading of these securities will be allowed once a week through periodic auctions.

Traders welcomed this step as it will enhance the liquidity of these stocks.