Description

BSE clarifies surveillance framework for companies under Insolvency and Bankruptcy Code (IBC) for both non-derivative and derivative securities.

Summary

BSE has issued clarification on surveillance measures for securities of companies under Insolvency and Bankruptcy Code (IBC). The framework establishes two-stage surveillance system with progressively stricter measures including gross settlement, price bands, margin requirements, and trading restrictions based on price volatility thresholds.

Key Points

  • Two-stage surveillance framework (Stage I and Stage II) for IBC companies
  • Separate frameworks for non-derivative securities and securities with derivative products
  • Gross settlement + ±5% price band + 100% margin imposed from T+2 day upon IBC announcement
  • Once-a-week trading restriction in both stages
  • ASD (100% Trade Value) to be deposited by buyers
  • Securities move out of surveillance after non-promoter holding reaches ≥25% and completion of 3 calendar months
  • Stage II includes “no upward movement permitted” restriction
  • For derivative securities: 100% margin levied, no fresh contracts issued, existing surveillance applies after contract expiry

Regulatory Changes

  • Clarification of existing IBC surveillance framework
  • Defined criteria for movement between surveillance stages
  • Specified exit conditions based on non-promoter shareholding threshold
  • Separate treatment for securities with derivative products available

Compliance Requirements

  • Companies under IBC must comply with surveillance measures immediately from T+2 day
  • Buyers must deposit 100% trade value as ASD
  • Trading members must ensure compliance with once-a-week trading restriction
  • Quarterly shareholding pattern reporting or ad-hoc updates required for exit consideration
  • No fresh derivative contracts allowed for IBC securities

Important Dates

  • Surveillance measures effective from T+2 day upon IBC announcement
  • Monthly review for Stage I to Stage II movement (minimum 1 month in Stage I)
  • Monthly review for Stage II to Stage I movement (minimum 1 month in Stage II)
  • 3 calendar months completion required after attaining ≥25% non-promoter holding for exit
  • Daily basis review for inclusion under IBC Stage I

Impact Assessment

  • Severe trading restrictions will significantly reduce liquidity for IBC securities
  • 100% margin requirement will deter speculative trading
  • Once-a-week trading severely limits market participation
  • No upward movement in Stage II completely restricts price appreciation
  • Framework provides clear exit mechanism encouraging resolution of insolvency cases
  • Separate derivative treatment prevents circumvention of cash market restrictions

Impact Justification

Clarifies critical surveillance framework affecting trading of IBC companies with strict margin and trading restrictions