Turkey boosts market surveillance with circuit breaker

The Istanbul Stock Exchange has introduced an automatic circuit breaker system, enabling fully automated suspension of trading on a stock-by-stock basis.
By None

The Istanbul Stock Exchange (ISE) has introduced an automatic circuit breaker system, enabling fully automated suspension of trading on a stock-by-stock basis.

Active from 10 January 2011, the system is designed to monitor trading activity on the exchange and, in the event of an abnormal price or quantity movement, suspend trading of the affected stock for a pre-defined period of time, usually 15 minutes.

If the abnormal price or quantity movement persists, the new system will automatically apply a circuit breaker until the end of the day. The relevant stock will then be subject to gross settlement the following trading day. Gross settlement period is initially 15 days. All details relating to a suspension will be announced automatically and simultaneously through the ISE's public disclosure platform.

The Securities and Exchange Commission introduced a market-wide circuit breaker programme across all US equities trading venues following the ”flash crash' of 6 May 2010, during which the Dow Jones Industrial Average index briefly fell by US$1 trillion before rebounding just as suddenly. The US programme requires exchanges to pause trading in certain individual stocks for five minutes if the price moves by 10% or more in the preceding five-minute period.

Most European trading venues already have circuit breakers in place – for example, trading on the London Stock Exchange's regime halted trading in five stocks on 24 August 2010 after they moved more than 5% from their opening price.

The ISE is currently seeking to modernise its trading practices in line with developments such as MiFID in Western Europe. Other recent changes include the introduction of an amendment allowing cancellation of orders, in September 2010. Previously, it had only been possible to amend orders aggressively – in other words, upwards in value.

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