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    Sebi, exchanges to tighten grip on speculative stocks

    Synopsis

    At present, stock exchanges try to prevent manipulation by transferring them to the trade-to-trade segment or T Group.

    ET Bureau
    MUMBAI: The capital market regulator and stock exchanges are planning to tighten their grip over small-cap and penny stocks that are susceptible to manipulation. The Securities and Exchange Board of India and the bourses may introduce a new segment called T+ Group, under which margin requirements would be steep and circuit filters would be lower.

    At present, stock exchanges try to prevent manipulation by transferring them to the trade-to-trade segment or T Group.. In this segment, traders have to take delivery of the shares they buy, while the daily maximum tradable limit is 5% on either side.

    Exchanges shift stocks to the T Group when there is speculation and unusual movement on the back of higher-than-average volumes. These requirements result in a fall in unnatural activity in such shares. The plan to introduce a new segment comes on the heels of reports of manipulation in stock prices during inclusion into or exclusion from the T Group.

    The T+ Group would include shares that have been in the T Group for over three months and whose price-to-earnings (P/E) ratio is less than 250 and book value is less than 30 times, said a source familiar with the matter. “Exchanges have got complaints that there is still a lot of manipulation despite stocks being shifted to the T Group. So, they felt there is a need for a new group,” said a source in the know.

    Under the T+ Group, margin requirement of 500% and 100% will be introduced on sell and buy transactions respectively. Funds and shares wo
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    uld be released by the clearing corporation of the exchange only after a month, while the circuit filter would be even lesser than 5%. It has also been proposed that at the time of review, the companies having a P/E greater than 50 times or price-to-book greater than 10 times, will be eligible for moving out of T+ Group to T Group.

    Earlier this month, bourses moved almost 550 stocks out of the T Group after they were convinced that speculation has receded. The T Group was introduced shortly after the Ketan Parekh scam in 2001 but the detailed norms of how, when and why shares would be put under surveillance were not disclosed until November 2010.




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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