When the index rises or falls by 5%, the circuit breaker will trigger a 15-minute suspension in stock trading.
Advertisement
The Chinese measure also calls for trading to be suspended until the following day if, even after temporary halts, the total daily change in the CSI 300 exceeds 7 percent.
The Shanghai index fell 30 percent in a few weeks but rebounded following Beijing’s intervention. The new mechanism will cover trading of all stocks, convertible bonds and stock options and futures contracts.
The idea of a circuit breaker mechanism was first proposed in September and the public was given until Sept 21 to give their feedback.
The exchange said the plan has been approved by the CSRC.
Since then the market experienced severe volatility.
“Market moves with good reasons, and circuit breaker might actually cause more extreme market movements because investors would fear being too slow to react to good or bad news”. “They only make it harder to exit when necessary”. To halt the $5 trillion plunge, the government banned share sales by major investors and allowed more than 1,400 companies to suspend trading.
China has already set a daily trading limit of 10 percent for the rise and fall of individual stocks. China’s index futures market closes at 0715 GMT.
Advertisement
A group of state entities bought shares to prop up prices. Last month, three of the nation’s largest brokerages came under investigation for alleged rule violations. Asian stocks sank Friday, extending a sell-off in world markets after Europe’s central bank unveiled plans to stimulate the continent’s ailing economy that fell short of investor expectations.
