Enhanced Surveillance Measure (ESM) - April 2026 Update

Description

BSE updates the Enhanced Surveillance Measure (ESM) framework, adding new securities with 100% margin requirement and shifting qualifying securities from Rolling Settlement to Trade-for-Trade segment effective April 16-17, 2026.

Summary

BSE has issued an update to its Enhanced Surveillance Measure (ESM) framework under Notice No. 20260415-32. Securities meeting the ESM inclusion criteria will face a minimum 100% margin requirement effective April 17, 2026, on all open and new positions. Qualifying securities will also be migrated from the Rolling Settlement segment to the Trade-for-Trade (TfT) segment. Some securities currently in the framework will be downgraded to Stage I, while others will exit the framework entirely.

Key Points

• Securities listed in Annexure I have satisfied ESM inclusion criteria and will attract a minimum 100% margin on all open positions as on April 16, 2026, and on new positions from April 17, 2026
• Some securities in ESM will be moved to a lower stage (Stage I) under the ESM Framework effective April 16, 2026
• Securities qualifying under ESM will be shifted from Rolling Settlement to Trade-for-Trade (TfT) segment effective April 17, 2026
• Securities moving to Stage II will be subject to Trade-for-Trade with a 2% price band and Periodic Call Auction effective April 16, 2026
• Securities exiting the ESM framework are listed in Annexure II, effective April 16, 2026
• A consolidated list of all securities under the ESM framework is provided in Annexure III
• ESM operates in conjunction with all other prevailing surveillance measures imposed by exchanges

Regulatory Changes

This notice references and builds upon earlier ESM circulars:

• Notice No. 20230602-44 (June 02, 2023)
• Notice No. 20230718-46 (July 18, 2023)
• Notice No. 20240809-42 (August 09, 2024)
• Notice No. 20240920-63 (September 20, 2024)
• Notice No. 20241004-65 (October 04, 2024)
• Notice No. 20250725-61 (July 25, 2025)

The ESM framework continues to evolve with periodic reviews and stage-based classification (Stage I and Stage II) to manage market surveillance risk.

Compliance Requirements

• Trading Members/Brokers: Must ensure minimum 100% margin is collected on all open and new positions in ESM-listed securities from April 17, 2026
• Clearing Members: Must account for Trade-for-Trade settlement obligations for newly added ESM securities
• Market Participants: Must note that ESM securities are subject to stage-specific trading restrictions including price band and periodic call auction requirements for Stage II securities
• Members may direct clarifications to bse.surv@bseindia.com

Important Dates

Impact Assessment

High impact on traders and investors holding positions in affected securities:

• Liquidity Reduction: Migration to Trade-for-Trade eliminates netting benefits, requiring full delivery on each transaction, significantly reducing speculative activity
• Capital Burden: The 100% margin requirement sharply increases the capital needed to hold positions, likely forcing position liquidations
• Price Discovery: Stage II securities with a 2% price band and Periodic Call Auction restrict intraday price movement and continuous trading, limiting price discovery efficiency
• Investor Sentiment: While BSE clarifies ESM inclusion is purely a surveillance measure and not an adverse action against the company, market perception may still negatively impact stock prices
• Price Band Restoration: Upon exit from ESM, price bands revert to pre-ESM levels unless the security is subject to another surveillance measure

Specific securities affected are detailed in the attached Annexures (I, II, III) to the notice.

Impact Justification

Directly affects trading conditions for multiple securities including 100% margin imposition, segment migration from Rolling to Trade-for-Trade, and price band restrictions of 2% — materially limiting liquidity and trading flexibility for affected stocks.