Exchange Surveillance Measures in India: Safeguarding Market Integrity in 2026

An Overview of Exchange Risk Surveillance Measures (RSMs)

To ensure capital market integrity, SEBI and exchanges (NSE/BSE) take tech-savvy, multi-layered, proactive steps to conduct real-time and periodic monitoring of trading activities using advanced data analytics (AI, Algo) and alert systems and also through annual joint surveillance meetings. When any securities trigger predefined objective criteria, they are subjected to higher restrictions designed to discourage trading, reduce speculative activity and enhance transparency. All such RSMs are subjected to periodic reviews.

1) Additional Surveillance Measure (ASM)

• ASM targets stocks based on predefined, objective parameters that broadly focus on trading anomalies/abnormal trading patterns, and potential market abuses
• In most of the cases, ASM also targets stocks that fall under some ‘financial stress’ category, like IRP & IBC.
• But ASM is not limited to financially stressed/IBC names; it is a surveillance-trigger framework
• ASM acts as an early warning system, while allowing continued trading under stricter conditions
• Stages – Short-Term ASM (STASM) and Long-Term ASM (LTASM), with stages (I, II, III, etc.)
• Regulatory Restrictions
  • Higher margin requirements (often up to 100%)
  • Reduced daily price bands (usually 5% or lower)
  • Transfer to the T2T segment

2) Graded Surveillance Measure (GSM)

• GSM is designed for securities that, based on objective surveillance parameters, display heightened risk of abnormal price action or potential manipulation.
• Securities may be shortlisted based on parameters such as:
  • Price behaviour disproportionate to observable fundamentals/disclosures 
  • Unusual price patterns that raise surveillance concerns
• The framework uses objective, quantifiable parameters to shortlist securities, enabling a graded (staged) application of restrictions. 
• This ensures proportionate intervention: lighter curbs for moderate concerns and severe limits for high-risk cases like SME securities.
• Key Surveillance Actions by Stages
  • Stage I: Applicable margin rate is set at 100%, and the daily price bands are reduced to 5% or lower (as applicable). 
  • Stage II: The security moves to Trade-for-Trade (T2T) settlement; An Additional Surveillance Deposit (ASD) of 50% of the trade value must be deposited by buyers
  • Stage III: Trading is restricted to once a week (typically every Monday or the first trading day of the week), with higher ASD (100%)
  • Stage IV: In square-off mode only, no fresh position

3) Enhanced Surveillance Measure (ESM)

• ESM was introduced and further recalibrated to focus on small-cap and micro-cap vulnerabilities. 
• ESM targets companies with lower market capitalisation, especially those below ₹1,000 crores (revised threshold post-2025 updates).
• A significant revision effective from July 2025 incorporated valuation-based filters. 
• Stocks are shortlisted based on high-low or close-to-close price variation over 3, 6, or 12 months exceeding one standard deviation (SD) from market norms.
• Stage actions (as per Annexure):
  • Stage I: 100% margin from T+2; T2T settlement with 5% band (or 2% if already in 2% band) 
  • Stage II: T2T with 2% band; 100% margin; trading via periodic call auction on all trading days (with entry conditions including valuation filter such as PE≤0 or PE > 2× benchmark PE)

F&O Market Surveillance

• Intraday Position Monitoring (random) – One of the cornerstone reforms is the shift from EOD to intraday monitoring of positions.
• Positions are measured using Futures Equivalent (FutEq) or delta-adjusted metrics, which better reflect actual risk exposure compared to notional values.
• Breaches trigger immediate actions like ASD, forced position squaring, or penalties. 
• On expiry days, violations attract stricter penalties (effective from December 6, 2025)
• For single-stock derivatives, SEBI now linked MWPL more tightly to cash-market liquidity metrics, including free float and Average Daily Delivery Value (ADDV)
• For index derivatives, enhanced entity-level caps (including FPIs and MFs) are used to prevent concentration risks.

Conclusions

All these RSMs are dynamic in nature – exchanges publish updated lists regularly (like NSE ASM/GSM/ESM reports), and brokers display warnings during order placement or simply don’t accept such orders in the normal course. Various RSM measures, as discussed above, are intended to balance India’s explosive capital market growth with institutional credibility and protect vulnerable, less financially educated small retail market participants, most of whom are incurring heavy losses led by F&O trading.

These RSMs continue to play a pivotal role in detecting irregularities, deterring abuse, and promoting alignment between prices and realities. As India's capital markets evolve amid rising retail participation after COVID, SEBI and exchanges' proactive RSM stance underscores a commitment to sustainable, inclusive development. Market participants must stay informed through official channels, conduct thorough due diligence, and view surveillance not as an obstruction but as a safeguard for long-term wealth creation. Ultimately, robust & dynamic RSM strengthens the foundation of one of the world's most resilient equity markets, paving the way for robust growth.

SEBI continues to evolve its approach with technology at the forefront. Exchanges are mandated to upgrade systems for real-time data collection, anomaly detection, and pattern recognition. Advanced analytics and AI/ML are increasingly deployed to automatically flag suspicious trading strategies, unusual position build-ups, or coordinated activity to ensure market integrity, risk control, investor protection and transparency with provisions of heavy fines in case of aberrations.