Update | New circuit breaker to kick in on Monday on Hong Kong’s bourse
Traders optimistic new measure can avoid the farce that roiled China’s markets in January
Starting on Monday, a new circuit breaker will kick in on the Hong Kong Stock Exchange to smooth out volatility in the stock market.
Traders are optimistic that the new measure, implemented after considerable consultations, will be able to avoid the mess that roiled mainland China’s equity markets in January.
Hong Kong’s “volatility control mechanism” will halt trading in any stock once the price surges or slumps by 10 per cent within 5 minutes, giving traders a 5-minute period to cool off.
Two halts will be activated every day for the 81 stocks of the Hang Seng Index and the Hang Seng China Enterprises Index, also called the H-share index, one halt each for the two sessions for the day.
Hong Kong has been considering mechanisms to reduce volatility as an answer to high-speed algorithmic transactions that can trigger flash crashes, roil markets -- and ruin lives -- when they pour or pull tens of billions of dollars quickly into and out of stocks.
Plans for the circuit breaker had been in the works since at least the middle of 2015, when the Hong Kong exchange made a decision for implementation this year.
Fresh on the minds of the Hong Kong market watchdog and traders is the farce in China’s stock market earlier this year.
