The Colombo Stock Exchange (CSE) yesterday said market halts are a well-coordinated, pre-defined measure to mitigate the sudden effects of an extreme price decline, in the best interest of capital market investors.
“Halting trading of the market due to an extreme decline in a particular index during the day, as a result of the share prices falling rapidly, is a measure that is implemented by stock markets around the world.
“Trading halts triggered by circuit breakers, were a common occurrence during the recent weeks and continue to be so in stock markets globally, as the investment community responds to global economic implications of the COVID-19 pandemic,” CSE said in a statement. A similar trend was visible on the CSE as well, with a 30-minute market halt being imposed on March 10th, 12th, 13th and 20th due to the S&P SL 20 index declining over 5 percent from the previous day’s closing levels.
The exact methodologies governing Market Halts vary in stock markets around the world, and such measures are taken by stock exchanges globally with the objective of addressing unanticipated volatility.
An initial market halt is imposed on all securities traded on the CSE temporarily for a period of 30 minutes in the event of the S&P SL 20 index recording a decline of above 5 percent compared to the previous day’s closing level.
Further, Market Halts may be imposed within the same trading day in the event the S&P SL 20 index records a further decline of above 5 percent upon re-opening the market following the initial market halt.
Essentially, the market will be halted for a period of 30 minutes at every 5 percent decline in the S&P SL 20 index within a trading day.
The CSE said a market halt does not result in an end of trading for the day, unless the halt is imposed at 2. 00 p.m. or later, where the 30-minute halt would remain in effect till the end of the scheduled regular trading, which usually takes place at 2.30 p.m. at CSE.