Categorized | Singapore Trading News

SGX proposes circuit breakers to curb price swings

Singapore Exchange (SGXL.SI) said on Thursday it is consulting on a proposal to bring in circuit breakers for its securities market as a safeguard to help prevent huge swings in stock prices during times of price volatility.

Circuit breakers are being brought in by exchanges across the world following the so-called “flash crash” last year in the U.S. when the Dow Jones industrial average plunged 700 points in the space of a few minutes before rebounding.

Singapore Exchange said it is looking to apply the circuit breakers to all the stocks in the Straits Times Index and the MSCI Singapore Free Index.

The circuit breakers would kick in if an incoming trading order would cause a stock to trade outside of a 10% band around its reference price. The circuit breakers would block that trading order and implement a five minute cooling off period where trading could only take place within the original trading band.

After the five minute cooling-off period, a new reference band will be established at the upper or lower limit of the previous price band which was exceeded.

Adapted from i3investor & Reuters.

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