Circuit Breakers   A Survey Among International Trading Venues

Clapham, Benjamin; Gomber, Peter; Haferkorn, Martin; Jentsch, Paul; Panz, Sven

doi:10.2139/ssrn.3120370

Cited by 1 publication

(3 citation statements)

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“…According to a survey conducted by the World Federation Exchange (Clapham et al , 2018), 86% of the responding stock exchanges use circuit breakers. The two main types of circuit breakers are trading halts and price-limit-triggered trading interruptions (Abad and Pascual, 2007).…”

Section: Mandated Trading Interruptionsmentioning

confidence: 99%

“…The two main types of circuit breakers are trading halts and price-limit-triggered trading interruptions (Abad and Pascual, 2007). In cash markets [3], the two popular circuit breaker mechanisms are volatility interruptions occurring mainly in Europe, Africa and the Middle East regions and market-wide trading halts observed often in the Asia-Pacific region (Clapham et al , 2018). The circuit breakers are triggered by price movements of indexes or single stocks when price thresholds are hit.…”

Section: Mandated Trading Interruptionsmentioning

confidence: 99%

“…Only volatility interruption mechanisms generally apply dynamic price ranges, most often along with static ranges. Clapham et al (2018) report that for trading venues using market-wide trading halts, six of 17 responding trading venues use one price level to trigger the circuit breaker and the others use more than one price level. Durations of trading interruptions vary by trading venue.…”

Section: Mandated Trading Interruptionsmentioning

confidence: 99%

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Price-limit effectiveness: evidence from the Borsa Istanbul (BIST)

Aktas

Kryzanowski

Jie

2021

IMEFM

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Purpose This paper aims to analyze the impact of price-limit hits by hit type and when such hits start and stop using intraday trades and quotes at a one-second frequency for firms included in the BIST-50 index during the 13-months starting with March 2008. Like the recent COVID-19 period, this period includes the heightened stress in global financial markets in September 2008. Design/methodology/approach Using intra-day trades and quotes at a one-second frequency, the authors examine the market effects of price limits for firms included in the BIST-50 index during the global financial crisis. The authors compare the values of various metrics for 60 min centered on price-limit hit periods. The authors conduct robustness tests using auto regressive integrated moving average (ARIMA) models with trade-by-trade and with 3-min returns. Findings The findings are supportive of the following hypotheses: magnet price effects, greater informational asymmetric effects of market quality and each version of price discovery. Results are robust using samples differentiated by cross-listed status, same-day quotes instead of transaction prices and equidistant and trade-by-trade returns. Originality/value The authors use intraday data to reduce measurement error that is particularly pronounced when daily data are used to assess price limits that start and/or stop during a trading session. The authors contribute to the micro-structure literature by using ARIMA models with trade-by-trade and 3-min returns to alleviate some bias due to the autocorrelations in returns around price-limit hits in the presence of a magnet effect. The authors include some recent regulation changes in various countries to illustrate the importance of circuit breakers using price limits during COVID-19.

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Section: Mandated Trading Interruptionsmentioning

confidence: 99%

Section: Mandated Trading Interruptionsmentioning

confidence: 99%

Section: Mandated Trading Interruptionsmentioning

confidence: 99%

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