In a recent notice Pakistan Stock Exchange (PSX) has proposed to widen the existing scrip-level circuit breakers (CBs) to a maximum of 15% and introduce trading halts if the KSE-30 index movement reaches 15%.
Globally, a variety of practices have been observed in relation to CBs and market halts, said PSX. In the international markets, halts are very common and CBs are much wider.
The bourse has passed on the proposals for the public comment, explaining that the proposed measures were in line with practices prevalent in the international markets.
Upon the imposition of market halt, all the equity and equity derivatives will be suspended. The market will have a 5 minutes pre-open before its re-opening. Margin collection will be made by NCCPL.
The bourse said the introduction of index-based market halts would facilitate in managing risks,
Imposing such halts on index movement would allow adequate cooling off period to the investors to assess the market.
It would result in strong fluctuations and buffer up volumes, but risk would be managed. The new changes will be effective in about two months, the sources said.
The Circuit Breaker, which currently prevails at 5%, is proposed to be raised to 10% and finally to 15% of the price movement in phased manners.
Circuit Breaks are the maximum allowable price movement upwards or downwards in a single intra-day. A stock that hits either direction cannot be traded further in that direction.
The existing CBs of 5% would be enhanced to 10% gradually increasing by 0.5% on fortnightly basis and latter in the similar manner to 15%.
In practical application, upon completion of first phase, the CBs of 5% would be applicable for 45 minutes during which trading would be allowed at 5% CBs.
New CBs rules would be applied in both ready and futures segment.