SEBI is very active in the recent past and has implemented several measures to maintain the market integrity. First, they implemented GSM framework and then Additional Surveillance Measure. Now to strengthen the market further, SEBI has introduced a new framework called Advance Price Band (APB). This framework helps to maintain the integrity of the market by trade restriction on the BSE platform. This framework shall be applicable to the selected securities based on the criteria like average market capitalization, PE ratio, number of price band hits.
This measure has been implemented mainly to curb the excessive price movement in the securities listed on BSE trading platform. In August 2015, BSE has introduced Periodic Price Band measure to control the sudden hike/fall of the security price.
Since then these applicable periodic price bands were into effect till 2nd May 2018. With the introduction of the Advance Price Band, the Periodic Price Band stands discontinued. As per the APB framework, additional periodic limits i.e. monthly and quarterly on the applicable daily price bands shall be applicable. These limits are as below.
Where X= the close price of the stock preceding the date of applicability.
Let’s understand the same with the example. Take the example of 10% daily price band then the periodic limits shall be,
Securities falling under APB framework will remain for minimum 90 days and shall be eligible to move out if doesn’t qualify the above-given criteria.
Advance Price Band rules
- Advance price band framework shall be applicable in addition to the daily price band framework.
- BSE will calculate the upper and lower limits for daily/monthly/quarterly.
- for newly added security, the closing price of the first trading day will be the base price for calculation of monthly and quarterly price bands.
- Security to remain in the APB framework for at least 90 days.
- Advance Price Band framework is applicable only on the securities traded on BSE platform.
- APB limits shall be calculated on the basis of the current daily price band.
- The applicable price bands are made available in the evening for the next trading day.
With this measure, it is very difficult for the people who abused the system and playing with the price of the securities for their interest.
For more details on this, you may check the BSE site.