The exchanges have put in place systems which generate alerts on company-specific news in the media. And, then follow up with companies to verify the news.
Amid growing instances of media reports triggering wild swings in stock prices, stock exchanges have raised their watch on this.
In 2016, the two major ones, BSE and the National Stock Exchange, sent 42 per cent and eight per cent more queries, respectively, over the previous year to listed companies, seeking clarity on rumours and for information verification.
In the past two months itself, the exchanges have sent many more such queries.
The exchanges have put in place systems which generate alerts on company-specific news in the media. And, then follow up with companies to verify the news.
Similarly, if there is any unusual movement in stock prices, the exchanges say they query companies on any price-sensitive information that needs to be disclosed.
“Disclosures are closely monitored from the standpoint of material information and also vis-à-vis possible rumours appearing in various media.
“Any differences observed therein are required to be explained by the companies and their responses are then disseminated on the exchange website, for the benefit of investors and market participants, to take informed decisions,” said a BSE spokesperson.
Stock exchange data showed NSE sought price movement clarification from 549 listed entities in 2016, as compared to 521 in 2015. BSE's surveillance department sent rumour verification letters to 287 companies in 2016.
Further, in cases where there is a spurt in price or volume without any major corporate announcement, clarification is sought and the company's reply disseminated.
The process, one was told, was based on pre-decided criteria and in coordination with the Securities and Exchange Board of India and other bourses.
Under the current listing regulations, companies are bound to reply to the exchanges. This could be one reason for the increase in surveillance enquiries, said a person familiar with the development. The challenge is to identify relevant information.
Companies listed on stock exchanges are required to make certain disclosures to the latter in a timely manner. Exchanges have broadly divided the surveillance reports in four categories.
These being rumour clarification in the case of a spurt in prices and volume; daily review of price band which determines the range in which a security moves; periodic review of movement of securities on a trade to trade basis; and, a periodic call auction session for illiquid stocks.
Besides, the exchanges have implemented a mechanism to prevent accidental self-trades and also brought changes in the format for disclosure under the Sebi (Prohibition of Insider Trading) Regulations.
Sebi conducts meetings at regular intervals with stock exchanges and depositories, to track surveillance activities and market movements.
On the basis of reports from the exchanges or specific complaints or sometimes on its own accord, preliminary enquiries are conducted to determine if a trade points to market manipulation or insider dealing.
