Sebi brings more stocks under price-band net

To thwart excessive price movements, market regulator Securities and Exchange Board of India (Sebi) has decided to extend the maximum daily movement of up to 20 per cent to shares of all those companies that do not have any individual derivative products, irrespective of whether they are part of broader derivative indices.

Currently, no price bands are put on those shares which have either individual stock derivatives, or are part of a grouping used as an underlying asset for index derivatives.

The price bands of up to 20 per cent would be extended to this new category - shares forming part of index derivatives but not having individual derivatives - would be implemented from February 17, Sebi said in a circular to stock exchanges.

The price bands vary from as low as 2 per cent to as high as 20 per cent, depending on the liquidity, trading volumes and other factors.

These bands limit the daily upward or downward movement in a stock to their applicable levels.

Sebi said that the decision has been taken as per recommendations of its Secondary Market Advisory Committee "as a measure to protect against excessive price movements".

Subsequently, individual scrip-wise price bands of up to 20 per cent will be implemented on all "those scrips on which no derivatives products are available but which are part of Index Derivatives", Sebi said.

Sebi directed stock exchanges to implement these price bands with effect from February 17, 2014 and take necessary steps to put in place systems for its implementation, including by carrying out necessary amendments to the relevant byelaws, rules and regulations.

While there are thousands of stocks listed in the stock market, derivative (futures or options) contracts are not available on all of them.

At the NSE, futures and options on individual securities are available on 135 securities, while number of such stocks on BSE is 43, according to latest data on their websites.

Besides, there are F&O contracts based on some indices including Sensex, Nifty, as also indices for banking, IT, Nifty Midcap and BSE 100.