There are no circuit breakers in place in the Securities market currently. In the event of rapid price movements, investors may not have time to make informed decisions when they trade.
Circuit breakers are intended to guard against disorderly situations in the face of rapid and unchecked market movements, By implementing circuit breakers, investors are given time to assimilate incoming information and make informed choices during periods of high market volatility.
A circuit breaker is a price band set which varies with movements in the traded price of the instrument throughout the day. The price band comprises an upper and lower price limit based on a deviation of 10% from the reference price.
The circuit breaker is activated when an incoming order has a match with an existing order in the order book at a price outside the circuit breaker limit. Trades at the limits will not activate the circuit breaker.
When the breaker is activated, a cooling off period of five minutes will take place. During the cooling off period, trading can still take place within the existing price band.
All the existing orders will be unaffected and new orders can still be placed in the order book as long as they do not result in the matching of trades outside the price bands.
Any incoming order that is immediately able to match against another order at a price outside of the existing price band will be rejected. However, it will not extend the cooling-off period. An illustration
Scenario: Circuit breaker for ABC shares is triggered and a 5-minute cooling off period is in place.
Only buy orders on 5 lots of ABC shares will be accepted and matched against the existing sell order of ABC shares at $11. The other 5 lots of buy order for ABC shares will be rejected by the system as it can match the 5 lots of sell order of ABC shares at $11.01, which is outside the upper limit.
When the circuit breaker is activated, a CIRB indicator will appear in the “Rmk” column of the affected counter on the price page of the SGX website for the duration of the cooling-off period.
When the circuit breaker is activated, an instrument session state broadcast will be sent to brokers.
When an order is rejected due to the activation of or during a cooling-off period, brokers get return codes from the trading engine, similar to other instances of order rejection. The return codes for this form of rejection are as follows:
No, during a cooling off period, if any incoming order can potentially match against an order outside the price band, it will be rejected. However, the cooling off period will not be extended.
The breaker will operate continuously from 9:00 to 17:00 on a normal trading day during the continuous trading phase. Accordingly, it will not be active during the opening and closing routine.
Participants will be able to place orders outside the breaker limits during the opening and closing routines and the resulting prices could lie outside the breaker limits. The opening and closing routines inherently limit the risk of disorderly trading since all trades are executed at one price at the end of each routine.
The cooling off period will cease operation upon the commencement of any for the following, even if five minutes has not elapsed:
The on-going reference price used to determine the price band is generally the last traded price of an instrument five minutes ago.
The first reference price of the day is determined as follows:
No, the reference price and price bands will not be disseminated to market participants in the initial launch.
The instruments covered include:
A consistent threshold of $0.50 has been adopted across all instruments in different currencies to avoid confusion to market participants
The reference price for an ESC will be the reference price of its underlying instrument at all times. The price band for ESC will therefore be the same as its underlying. For the STI ESC, the reference price will be the reference price of the SPDR STI ETF.
When an instrument is in cooling-off period, the associated structured and company warrants will halt trading. The halt in trading will lift with the end of the cooling-off period of the underlying instrument.
Dual currency counters on the same underlying instrument will be subject to independent circuit breakers.
Related counters of different board lot sizes on the same underlying such as Singtel/10/100 will be subject to the circuit breaker independently, with no coordination of price bands or cooling-off periods.
Circuit breakers will not apply for IPO instruments on the first day of trading. This is because the offer price of a New Listing may differ significantly from market valuation. Imposing circuit breakers on the first day may impede the price discovery process unnecessarily.
No, the unit share and buying in markets will not be covered by circuit breakers.
Direct Business trades outside of the prevailing price band that are reported to SGX-ST will not lead to the circuit breaker tripping. This is because these trades are privately negotiated and are not derived from market interactions; therefore they should not set off the circuit breaker.
Information on the initiative is found at www.sgx.com/tradingsafeguard.
Kindly contact your Trading Representative (TR) or helpdesk at 6438-8810.