Sebi asks stock exchanges to strengthen market-wide circuit breaker mechanism

BSE, NSE to compute benchmark index after every trade in the index constituent stocks

Stock market regulator the Securities and Exchange Board of India (Sebi) has directed the stock exchanges to strengthen their index based market-wide circuit breaker mechanism. In a circular issued to the stock exchanges yesterday, 12 January 2015, Sebi said that BSE and NSE shall compute their market-wide index viz. Sensex and Nifty, respectively after every trade in the index constituent stocks and shall check for breach of market-wide circuit breaker limits after every such computation of the market-wide index. Sebi further said that in the event of breach of market-wide circuit breaker limit, a stock exchange shall immediately stop matching of orders in order to bring about a trading halt. All unmatched orders present in the system shall thereupon be purged by the stock exchange, Sebi said. As per the index-based market wide circuit breaker mechanism, a coordinated trading halt in all equity and equity derivative markets nationwide takes place on 10%, 15% and 20% movement either way for Sensex or Nifty.

Sebi further said that BSE and NSE shall implement suitable mechanism to ensure that all messages related to market-wide index circuit breakers are given higher priority over other messages. The stock market regulator also said that BSE and NSE shall include in the scope of their annual system audit a review of their index based market-wide circuit breaker mechanism with the view to identify improvements.

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