SEC introduces 3-Tiered Circuit Breaker attached to S&P SL20

Apr 30, 2020 (LBO) – Sri Lanka’s Securities and Exchange Commission has introduced a Three Tiered Circuit Breaker structure which is to be attached to the S&P SL20 Index in order to eradicate distortion in the S&P SL20 Index by providing a layered approach.

The circuit breaker mechanism will take effect from the date the market re-opens and remain in force until further notice.

Three-Tiered Circuit Breaker Structure

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.

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