Bombay Stock Exchange and NSE have asked investors to be extra cautious while trading in illiquid securities. BSE and NSE have listed out 440 and 38 illiquid stocks, respectively.
Both the domestic exchanges have advised their trading members "to exercise additional due diligence while trading in these securities either on own account or on behalf of their clients".
Both BSE and NSE have listed out illiquid scrips that include Shyam Telecom, Global Offshore Services, DCM Financial Services, Creative Eye and National Steel and Agro Industries.
As per the notice by the BSE on April 8, 2020, these scrips will be traded in a periodic call auction mechanism, based on their trading activity from January to March 2020. This will be effective from April 13, 2020, said the SEBI circular.
Investors pose higher risks in Illiquid scurities as they are difficult to be sold easily. They see limited trading, due to which it is hard to find buyers for them as compared to frequently traded shares.
Trading members are advised to exercise additional due diligence while trading in these securities either on own account or on behalf of their clients, SEBI said in a statement.
The criteria for shifting securities in periodic call auction mechanism is decided in consultation with SEBI and applied uniformly across the stock exchanges and reviewed periodically, it added. Stock exchanges identify illiquid securities at the beginning of every quarter and move such securities to periodic call auction mechanism.
(With agency inputs)