To check market manipulation through ’penny stocks’, market watchdog SEBI will soon ask stock exchanges to create a new group for shares that are found to be prone to such activities.
The new group may be called ‘T+’ and would include shares that remain susceptible to manipulative activities despite having been put in the ‘T’ group where trading is restricted to delivery-based trades within a small price band of up to five per cent and intra-day trades are not allowed.
The stocks in the new group could be subjected to even shorter price bands of up to two per cent, while other restrictions could be put in place to ensure that only genuine trades are permitted on those counters, a senior official said.
It has been noticed that operators tend to push up the prices of T-group stocks ahead of their exit from such restricted trading categories, while the shares are dumped after luring gullible retail investors to these counters.
SEBI has already consulted stock exchanges and other stakeholders on this issue and the necessary framework for the new group would be put in place soon.
The stock exchanges classify various stocks traded on their platforms into several groups such as A, B, T and Z on certain qualitative and quantitative parameters.
The A Group stocks are generally large-caps with strong business fundamentals, high public float of shares and better compliance record on corporate governance and regulatory fronts. The B-Group stocks mostly include mid-caps and some small-caps.
The T-Group includes stocks which are settled on a trade-to-trade basis as a surveillance measure. These stocks usually attract a price band of five per cent, which is the maximum permissible limit within which the share price can move.
Under the trade-for-trade or T group segment, no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory.
The Z’ group includes companies which have failed to comply with its listing requirements and/or have failed to resolve investor complaints.