With effect from 24 February 2014, the Singapore Exchange Limited (the “SGX”) introduced circuit breakers as an additional market safeguard in the securities market. The SGX announced this in a press release on 22 January 2014.
Circuit breakers safeguard against disorderly trading as they address sharp price movements in a traded instrument within a short period, allowing the market some time to take stock of the situation.
Circuit breakers will be triggered when a potential trade is matched at a price that is over 10% away from the reference price. The reference price is the last traded price at least five minutes earlier. Once a circuit breaker is triggered, a five-minute cooling-off period follows where trading can only take place within a price band 10% above or below the reference price. Thereafter, trading resumes with a new reference price as established during the cooling-off period.
The SGX has also revised its error trade policy with effect from 24 February 2014.
Both circuit breakers and the revised error trade policy were the subject of public consultation exercises conducted by the SGX (in June 2013 and September 2011 respectively). The Allen & Gledhill Financial Services Bulletin (June 2013) featured an article about the public consultation on the introduction of circuit breakers. To read the article entitled “SGX seeks feedback on proposed dynamic circuit breakers on the SGX- ST market”, please click here.
Reference materials
More details on these initiatives can be found at www.sgx.com/tradingsafeguard and www.sgx.com/faqs.
The press release is available from the SGX website www.sgx.com by clicking here.
