NSE Triggers Circuit Breaker to Guard Against Sharp Market Fluctuations

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Thursday, November 12, 2020 / 01:40 PM / by NSE Nigeria / Header Image Credit: NSE Nigeria


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The Nigerian Stock Exchange ("NSE" or "The Exchange") has announced that a market-wide circuit breaker kicked in today, Thursday, November 12, 2020, at 12:55p.m, when the NSE All-Share Index (NSE ASI) rose beyond the set threshold of 5%, triggering a 30-minute trading halt of all stocks. This was the first time that the circuit breaker had kicked in since its introduction in 2016.


The Circuit Breaker protocol which was triggered by the increase of the NSE ASI from 33,268.36 to 34,959.39   was aimed at preventing the market from volatile trading activities. The market reopened at exactly 1:25pm with a 10-minute intraday auction session, before resuming continuous trading till the close of the day at 2:30pm.


During the halt of trading, no order could be placed until trading resumed. However, existing orders could be withdrawn or canceled​ but could not be modified. Trading halts did not affect the clearing, settlement, and depository operations for matched trades, as these functioned as normal. Furthermore, all existing orders keyed in prior to the trading halt were re-activated and were matched upon resumption of trading. 


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Additional Commentary by Stanbic IBTC 

"The NSE circuit breaker was triggered today and trading was halted for 30mins after aggressive buying pushed the ASI above 5% to 5.08%, a move that seems unlikely given the outlook and perhaps the first in in many years. The aggressive push has been primarily by local investors and retail clients - some speculative and others just seeking yields better than the almost nil returns in the Money markets. The absence of big international sellers has also contributed to this strong move - one in which some stakeholders are now becoming wary of. Please see an excerpt of the rule on circuit breakers below.

 

Rule 15.46: Trading Halts Due to Extraordinary Market Volatility (Index Circuit Breakers)

 

(a) The Exchange shall halt trading in all stocks and shall not reopen for the time period specified in this Rule if there is a Significant Market move in either direction.

 

(b) For purposes of this Rule, a Significant Market move means a five per-cent (5%) move in price of the All Share Index between 10:15am and 13:45pm on a trading day as compared to the closing price of the All Share Index for the immediately preceding trading day.

 

(c) Halts in Trading: if a Significant Market move occurs after 10.15am and any time up to and including 13.45pm The Exchange shall halt trading in all stocks for thirty (30) minutes. The Exchange shall not halt trading if a Significant Market move occurs after 13.45pm.

 

The Exchange shall halt and reopen trading based on a Significant Market move only once per trading day.

 

(d) If, following the reopening of trading after a Significant Market move halt, the All Share Index moves further by a minimum of five per-cent (5%) below its closing value on the immediately preceding trading day, during any trading day The Exchange will halt all trading for the remainder of the day. The last traded price in any security prior to the closing of the market shall be deemed the closing price in such security for the day.

 

(e) Re-opening of Trading: the re-opening of trading following a trading halt shall follow the procedures as may be set forth by The Exchange.

 

(f) Nothing in this Rule shall be construed to limit the ability of The Exchange to otherwise halt, suspend, or pause the trading in any stock or stocks traded on The Exchange pursuant to any other Exchange rule or policy.


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