Sebi revises circuit limit system for Sensex, Nifty

New calculation will apply for 10%, 15% and 20% circuit limits, with effect from Oct 1, 2013

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Market regulator Sebi today asked stock exchanges to calculate circuit limits -- the maximum permissible movement allowed to Sensex or Nifty in a trading session -- on a daily basis as against the current practice of doing the same on a quarterly basis.

Currently the stock exchanges calculate the circuit filters on the basis of the level attained by Sensex and Nifty at the end of every quarter and the same limits are applicable for every day of trade for the next three months.

The new calculation would apply for 10%, 15% and 20% circuit limits in Sensex and Nifty, the two benchmark indices of Indian stock market, with effect from October 1, 2013. While 10% and 15% limits result into temporary trading halts, a 20% movement triggers into trading getting halted for the entire day.

The move assumes significance in the wake of rising volatility in stock markets. For example, the 10% circuit limit for Sensex in the current quarter is fixed at 1,950 points, while 15% limit is at 2,900 points and 20% limit is 3,875 points.

These limits were fixed as per the closing value of Sensex at the end of previous quarter, April-June 2013.

However, the circuit limits would be much lower if they are calculated on the basis of previous day closing levels.

For example, the Sensex today closed at 18,235 points and therefore the 10% circuit filter would stand at 1,823 points for tomorrow's trade.

Announcing the new guidelines, Sebi said: "The stock exchange on a daily basis shall translate the 10%, 15% and 20% circuit breaker limits of market-wide index variation based on the previous day's closing level of the index".

Sebi further said that the stock exchange should resume trading in stocks with a 15-minute pre-open call auction session, after any trading halt.

In order to accommodate such pre-open call auction session, the extant duration of the market halt would be suitably reduced by 15 minutes, Sebi said.

Under the circuit breaker system, a rise or fall of 10% in Sensex triggers into the trading being halted across the market for one hour, if such a movement takes place before 1 pm, while halt is of 30 minutes is a 10% movement happens between 1 pm and 2.30 pm. Pm. In case the movement takes place at or after 2.30 pm, there is no trading halt at the 10% level.

In case of a 15% movement of either index, there is a two-hour market halt if the movement takes place before 1 pm. If the 15% trigger is reached between 1-2 pm, there is a one hour halt, while trading is halted for rest of the day if a 15% trigger is reached on or after 2 pm.

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