For effective surveillance of the securities market a need for a system with a common framework across all the stock exchanges was felt. The objectives of this system, termed as the “Stock Watch System”, are to give suitable indicators for the detection of potential illegal or improper activity to protect investor confidence and the integrity of the securities market and its players.

Databases
The Stock Watch System has standardized information available with all the stock exchanges. This standard information is stored in the form of four databases classified as follows

• Issuer Database
• Securities Database
• Trading Database
• Member Database

Issuer Database
This database is maintained by the stock exchange and is updated every week. The database contains information about the company whose instruments are traded on the exchange. This information includes the name, address, the line of business, the promoters, share holding pattern, capital history, balance sheet, profit and loss accounts, corporate actions, subsidiary companies etc.

Securities Database
This database is maintained by all the exchanges and updated every week. The database contains information about the instruments like shares, preference shares, warrants, and debentures etc, which are traded on the exchange. This information includes the name of the company, the instrument type, floating stock, trading start date, ex-date, no-delivery periods, dates and reasons for suspension of trading, details of fake and forged shares etc.

Trading Database
This database is maintained by all stock exchanges. It is updated online/daily/end of settlement based on the type of information. This information includes price, volume and value relating to the trades, obligations, deliveries and auctions, positions, price bands etc.

Member Database
This database is maintained by all stock exchanges. The information in this database includes the name and the type of membership, name, address and qualification, details of other exchange’s membership, securities in which the member is active, short and bad delivery record, suspension record, investor grievance complains, arbitration cases, sub-brokers with their names and addresses, the turnover details, net worth etc.

Surveillance System
Automated Surveillance system is the tool for monitoring real-time trading activities. The Alert system compares the movements of price and trading volume for each security with the parameters based on preset values. If there is an unusual change in terms of price and/or trading volume for any security, the alert system will generate an alert so that online securities monitoring team will be able to promptly investigate for the reason of that unusual change notice any security with unusual changes in its trading pattern. The main objectives of the system can be summarized below:

• To detect potential abnormal activity – Surveillance System detects onReal time basis potential abnormal activity by comparing with historical data. Abnormal activity may be pertaining to abnormality in respect of price, volume etc.
• Capture real time data on surveillance system – Instantaneous updation of price and quantity data is provided.
• To generate alerts in case of aberrations – Surveillance system generates alerts across live data based on predefined parameters.

Alerts
Online Real Time Alerts
These alerts are based on the trade related information during the trading hours. The objective of these alerts is to identify any abnormality as soon at it happens. These alerts include intra-day price movement related and abnormal trade quantity or value related alerts

Online Non Real Time Alerts
These Alerts are based on the traded related information at the end of the day and the available historical information. The objective of these Alerts is to analyze the price, volume and value variations over a period.

Price Variation
It is defined as the variation between the last trade price (LTPt) and the previous close price (P) of a security expressed as a percentage of the previous close price (P). i.e. Price Variation = {(LTPt - P)/ P} ´ 100

High-Low Variation
It is defined as the variation between the high price (H) and the low price (L) of a security expressed as a percentage of the previous close price (P). i.e. High-Low Variation = {(H - L)/ P} ´ 100

Consecutive Trade Price Variation
It is defined as the variation between the last trade price (LTPt) and the previous trade price (LTPt-1) of a security expressed as a percentage of the previous trade price (LTPt-1) i.e. Consecutive Trade Price Variation (DLTP) = {(LTPt - LTPt-1)/ LTPt-1} ´ 100

Quantity Variation
It is defined as the percentage variation between the total traded quantity Q and the average traded quantity Qavg expressed as a percentage of the average traded quantity.
Quantity Variation = {(Q - Qavg)/ Qavg} ´ 100
Quantity Variation Ratio = Q/ Qavg
Daily Average Traded Quantity = Total number of shares traded in the last ‘n’ trading days/n