Dear All,

This is with reference to circular CIR/MRD/DP/6/2013 dated February 14, 2013 & CIR/MRD/DP/38/2013 dated December 19, 2013 issued by SEBI on periodic call auction process for trading in illiquid securities in the exchange platform.
The main features of the new auction process are:
   
Trading in illiquid scrips in the equity market shall be conducted only through periodic call auction sessions.
  • Criteria for illiquidity – For the purpose of this circular, a scrip which trades in the normal market and is not shifted to trade for trade settlement, shall be classified as illiquid on a stock exchange if all the following conditions are met:
    1. Average daily turnover of less than Rs. 2 lakhs calculated for previous two quarters and
    2. The scrip is classified as illiquid at all exchanges where it is traded.

  • Of the scrips identified as per above criteria, scrips which satisfy any of the following conditions shall be excluded:
    1. Scrips with average market capitalization more than Rs. 10Cr.
    2. Scrips where company is paying dividend in at least two out of last three years.
    3. Scrips where company is profitable in at least 2 out of last 3 years, and not more than 20% of promoters shareholding is pledged in the latest quarter and book value is 3 times or more than the face value.
Exit from periodic call auction mechanism Stock exchanges shall move scrips from periodic call auction mechanism to normal trading session if the following criteria are met:
(2.4.1.) The scrip has remained in periodic call auction for at least one quarter
(2.4.2.) It is not classified as illiquid as per Criteria for Illiquidity.
Number of auction sessions - Stock Exchange may determine the number of call auction session for illiquid stocks. However in order have minimum trading sessions and uniform closing session, there shall be at least 2 sessions in a trading day with one uniform closing session across the exchanges.
Session duration - The call auction session duration shall be one hour, of which 45 minutes shall be allowed for order entry, order modification and order cancellation, 8 minutes shall be for order matching and trade confirmation and remaining 7 minutes shall be a buffer period for closing the current session and facilitating the transition to next session. The session shall close randomly during last one minute of order entry between the 44th & 45th minute. Such random closure shall be system driven.
Order Placement - The orders may remain valid throughout the trading day and un-matched orders remaining at the end of a call auction session may be moved into next call auction session.
Un-matched orders - All un-matched orders remaining at the end of a call auction session shall be purge.
Price band - A maximum price band of 20% shall be applicable on the scrips through the day. Exchanges may reduce the price bands uniformly based on surveillance related concerns.
If the Market wide Index Circuit Breaker gets triggered at any time during the periodic call auction session, the session shall be cancelled and all orders shall be purged. The periodic call auction session shall be resumed at the nearest half hour after the normal market resumes.
Penalty for certain trades - In the event where maximum of buy price entered by a client (on PAN basis) is equal to or higher than the minimum sell price entered by that client and if the same results into trades, a penalty shall be imposed on such trades. The penalty shall be calculated and charged by the exchange and collected from trading members on a daily basis. Trading members may recover such penalty from clients. The penalty so collected shall be deposited to Investor Protection Fund. Penalty for each such instance per session will be higher of the following:

0.50% of the trade value for sale and 0.50% of trade value for the buy, resulting in 1% penalty for the client on PAN basis.
  OR
2500/- for the buy trade and 2500/- for the sell trade, resulting in penalty of 5000/- for the client on PAN Basis.
Please click here for list of securities currently marked as illiquid by NSE, BSE and MCX-SX & Scrips blocked by Internal Surveillance along with the circulars issued by SEBI. The list of illiquid securities is subject to change as when the exchanges intimates based on the criteria specified.

In case of any violation, penalty would be levied by the exchanges and the same would be debited to the respective client's ledger.
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