Trading halt: Rules that work in India, China

For India, trading halts or suspension require a much wider fluctuation.

China on Monday suspended trading in equities on the first session of 2016 after shares on its stock exchanges plunged by 7 per cent, but for a similar kind of action in India, a 20 per cent movement is required.

Incidentally, the new circuit-breaker mechanism, intended to reduce excessive volatility in Chinese shares went into force from today.

Under this rule, following a 5 per cent drop in the CSI300 index, trading is halted in both Shanghai and Shenzhen exchanges for 15 minutes.

If the index falls further to 7 per cent, the markets are closed for the rest of the day.

However, for India, trading halts or suspension require a much wider fluctuation.

The index-based market-wide circuit breaker system applies at three stages of the index movement - 10 per cent, 15 per cent and 20 per cent.

These circuit-breakers when triggered bring about a coordinated trading halt in all equity and equity derivative markets in the country.

Under the Indian rules, a rise or fall of 10 per cent in benchmark index triggers a trading halt across the market for 45 minutes, if such a movement takes place before 1 pm, while halt is of 15 minutes, if a 10 per cent movement happens between 1 pm and 2.30 pm. In case the movement takes place on or after 2.30 pm, there is no trading halt.

In case of a 15 per cent movement, there is a 105 minutes halt if the movement takes place before 1 pm. If the 15 per cent trigger is reached between 1-2 pm, there is a 45 minute halt, while trading is halted for rest of the day if a 15 per cent trigger is reached on or after 2 p.m.

The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the NSE Nifty, whichever is breached earlier.

In case of a 20 per cent movement of the index, the trading is halted for the remainder of the day.