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China suspends “circuit-breaker” stock market rule

by ChemOrbis Editorial Team -
  • 08/01/2016 (11:57)
According to media reports, China has suspended its circuit breaker mechanism for the stock market as of Friday. The circuit breaker mechanism had been announced in December because of dramatic losses in share prices and was used for the first time on Monday and then again on Thursday after shares dipped more than 7%, setting off an automatic halt to trading.

In a statement, the China Securities Regulatory Commission (CSRC) reportedly said that they decided to suspend the circuit-breaker mechanism in order to maintain market stability as the negative effect of the new mechanism exceeded the positive ones.

Analysts commented that the existing mechanism, which imposes a 15-minute trading break after a 5% drop and an end to daily trading after a 7% drop, was ineffective at stemming losses as sell orders would mount following a 15-minute break and quickly push the market down to the full day stop level of 7%.
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