May 11, 2020 (LBO) – The Colombo Stock Exchange (CSE) closed trading for the day after the S&P SL 20 index dropped over 10 percent from the previous close.
The market was closed within a few minutes of trading as per the new directive issued by the Securities and Exchange Commission.
SEC introduced a Three Tiered Circuit Breaker structure which is attached to the S&P SL20 Index in order to eradicate distortion in the S&P SL20 Index.
Circuit breakers were created as guardrails for wild market moves, but as investors exit stocks amid widening economic damage, some question how well they work.
The CSE recommenced its operations today in line with the decision made by the government to relax curfew regulations in the Western Province.
Three-Tiered Circuit Breaker introduced by SEC
i. First Circuit Breaker – After the commencement of trading of the Colombo Stock Exchange (CSE) for the day, a Market Halt to be imposed for 30 minutes in the event the S&P SL20 index drops by 5%.
ii. Second Circuit Breaker – Having re-commenced trading after the cooling-off period of 30 minutes following the S&P SL20 drop of 5%, if the S&P SL20 index drops again by another 2.5%, a Market Halt to be imposed for another 30 minutes.
iii. Third Circuit Breaker – Upon re-commencing trading subsequent to cooling off period of 30 minutes following the S&P SL20 drop of 2.5% (altogether S&P SL20 has dropped by 7.5%) if the S&P SL20 index drops by a further 2.5% (S&P SL20 index has fallen altogether by 10% for the day), trading will be halted and the market shall be closed for the day.