CSRC to implement circuit breakers

Beijing, December 4

Chinese regulators announced a mechanism today to temporarily suspend stock trading in the event of wide price swings in the latest attempt to enforce stability in volatile markets.

Trading will be halted for 15 minutes if a broad market index, the CSI 300, rises or falls by five per cent, the China Securities Regulatory Commission (CSRC) announced. The measure takes effect on January 1.

Authorities are trying to restore confidence in Chinese stocks after a plunge in prices in June prompted a panicked, multi-billion dollar government intervention.

Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings to stop the market plunge.

The mechanism for temporary trading suspensions is intended to ‘safeguard market order, protect investor rights and promote orderly and healthy market development’, said a statement on the websites of the stock exchanges in Shanghai and the southern city of Shenzhen.

Such ‘circuit breakers’ are relatively common in Asian stock markets. In Thailand, trading is suspended for 30 minutes if the main market index falls 10 per cent from the previous day’s close.

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 seven per cent.

The CSI 300 is made up of the 300 largest-capitalisation stocks on China’s exchanges in Shanghai and the southern city of Shenzhen. It has risen or fallen by at least five per cent on six trading days this year, most recently on August 24, when it fell 7.8 per cent.