What are Circuit Breakers?

Volatility in stock prices is a cause of concern for both the policy makers and the investors. To curb excessive volatility, SEBI has prescribed a system of circuit breakers. The circuit breakers bring about a nation-wide coordinated halt in trading on all the equity and equity derivatives markets. An index based market-wide circuit breaker system applies at three stages of the index movement either way at 10%, 15% and 20%. The breakers are triggered by movement of either S&P CNX Nifty or Sensex, whichever is breached earlier. Further, the NSE views entries of non-genuine orders with utmost seriousness as this has market-wide repercussion. It may suo-moto cancel the orders in the absence of any immediate confirmation from the members that these orders are genuine or for any other reason as it may deem fit. As an additional measure of safety, individual scrip-wise price bands have been fixed as below:

  • Daily price bands of 2% (either way) on a set of specified securities,
  • Daily price bands of 5% (either way) on a set of specified securities,
  • Daily price bands of 10% (either way) on another set of specified securities,
  • Price bands of 20% (either way) on all remaining securities (including debentures, warrants, preference shares etc. which are traded on CM segment of NSE),
  • No price bands are applicable on scrips on which derivative products are available or on scrips included in indices on which derivatives products are available.

For auction market the price bands of 20% are applicable. In order to prevent members from entering orders at non-genuine prices in these securities, the Exchange has fixed operating range of 20% for such securities.

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