Singapore Exchange (SGX) has revealed proposals for dynamic circuit breakers that would safeguard the venue and its members against severe price fluctuations and has sought industry feedback.
Market participants have until 3 July to contribute evidence and submissions regarding the proposed circuit breaker, which would engage a 5-minute cooling off period if a potential trade was more than 10% above or below an instrument’s price. During the cooling-off period, market participants could continue to trade within the price band, which will remain constant throughout the cooling-off period.
This is the second time the exchange has sought market comment on circuit breakers. In 2011, SGX proposed a static circuit breaker with a similar 10% positive or minus price band, but based this on the instrument’s initial price before market open. This latest iteration would be based on dynamically changing prices.
In its proposal, SGX noted the implementation of circuit breakers was consistent with practice adopted in other exchanges internationally. It cited a report by the International Organization of Securities Commissions, which supports such safeguards to mitigate market disorder.
“A dynamic circuit breaker model would bring SGX in line with international best practice,” the proposal, released last week, read.
“US stock exchanges (with the Limit Up/Limit Down plan) and the Australian Securities Exchange (with its Anomalous Order Threshold/Extreme Cancellation Range) have moved towards adoption of dynamic circuit breakers in the past two years, joining the London Stock Exchange and Deutsche Börse which already employ some form of dynamic circuit breaker.”