Index Based Circuit breaker system for Indian Stock Exchanges
Index circuit breaker system is introduced in Indian Stock Markets wef 02 Jul 2001. This index based market wide circuit breaker system acts as a breather when there is Excess Movement in markets due to extraordinary events. Such Index Circuit Breaker (Nifty Circuit Breaker or Sensex Circuit Breaker) will cause to halt trading in all equity and equity derivatives markets across India. The market wide circuit breakers would be triggered by movement of either BSE Sensex or the NSE S&P CNX Nifty whichever is breached earlier.
The index-based market-wide circuit breaker system is applied in three stages of market movement (Index Movement of either Nifty or Sensex) either way. The three levels are 10%, 15% and 20%. Upto 11 Oct 2013, Circuit Breakers values are determined on the closing value of Index on the last trading day of the quarter. For example closing value of Index on 31 Mar is considered for next quarter. The values of 10%, 15% and 20% is calculated on this closing value on last trading day of the quarter.
Index Circuit Breaker withPre-auction Session
With effect from 14 Oct 2013, a new system of Daily revision of index based market-wide circuit breaker limits is introduced vide SEBI Circular No CIR/MRD/DP/ 25 /2013 Dated September 03, 2013. Earlier system of quarterly calculation of circuit breaker trigger is dispensed with and now the value of circuit breaker trigger is calculated based on the previous closing value of Index. Here is an example of daily calculated index circuit breaker trigger for 28 Oct 2013.
NSE and BSE has to provide real time index information to all other equity and equity derivatives exchanges in India. This helps to bring coordinated stop in trading in these segments as and when index circuit breakers triggers either in NSE or BSE (Which ever Occurs first).
MCX-SX also follows index circuit breaker trading halt for timings specified as above. But as mentioned in SEBI Circular all equity and equity derivative exchanges shall use either Nifty or Sensex for following circuit breaking trigger values. So, if index circuit breaker is trigger either in NSE or BSE trading will be halted in MCX-SX too but not vice versa.
Resumption of trading after the halt with a pre-open call auction session
(a) Post-observation of the trading halt, stock exchange shall resume trading in the Cash Market with a fifteen minutes pre-open call auction session.
(b) Such pre-open call auction session shall be governed as per the provisions mandated vide SEBI circulars no. CIR/MRD/DP/21/2010 dated July 15, 2010, CIR/MRD/DP/32/2010 dated September 17, 2010 and CIR/MRD/DP/6/2013 dated February 14, 2013.
(c) In order to accommodate such pre-open call auction session, the extant duration of the market halt prescribed vide SEBI circular June 28, 2001 shall be suitably reduced by fifteen minutes.
Index Based Market Wide Circuit Filter for IPO’s
If the normal market is closed due to Index based market-wide circuit filter breach anytime
during the order collection period for a new listing of a security (IPO), relisting of a security, SME securities and illiquid securities periodic call auction session, the respective sessions shall be closed immediately and all outstanding orders of these sessions shall be cancelled. A fresh session on the same day shall be conducted for new security (IPO) and relisting of a security. The fresh session shall be for duration of 1 hour out of which 45 minutes is for order collection/modification/cancellation, 10 minutes is for order matching and 5 minutes is buffer period. This session shall close randomly anytime between the 44th and 45th of the order collection period. The periodic call auction sessions for illiquid securities shall be held at the next scheduled time after the start of normal market.
If the normal market is closed due to Index based market-wide circuit filter breach anytime during the order matching period for a new listing of a security (IPO), relisting of a security, SME securities and illiquid securities period call auction, the matching process shall be completed.