The major bourses around the world often go for coordinated cross-market trading halts if a severe market price decline or gain reaches levels that may exhaust market liquidity spreading huge speculation. These limits, known as circuit breakers, may halt trading temporarily or, under extreme circumstances, close the markets before the normal closing.
On Monday, circuit breaker comes into effect when the market regulator halts trading for the trade as it breaks the upper circuit limit — for the first time in India. Market regulator Sebi introduced the system on June 28, 2001.
There are 3 types of circuit limits — 10%, 15% and 20% movements of th stock indices. The absolute values of these limits are not based on the previous day’s close. These are calculated by the bourses at the beginning of each quarter.
Source: Business Today
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