SEBI revises circuit breaker system for derivatives trading

The Securities and Exchange Board of India (SEBI) has revised the index-based circuit breaker mechanism for trading in the equity and equity derivatives markets by providing for daily revisions in circuit limits.

The changes have been made on the basis of the recommendations of the Secondary Market Advisory Committee (SMAC), the market regulator said in a release on Tuesday.

Accordingly, stock exchange will, on a daily basis, translate the 10 per cent, 15 per cent and 20 per cent circuit breaker limits of market-wide index variation based on the previous day's closing level of the index.

Resumption of trading after the halt with a pre-open call auction session will be on the cash market with a fifteen minute pre-open call auction session.

Such pre-open call auction sessions will be governed by the provisions mandated by the SEBI. However, in order to accommodate such pre-open call auction session, the extant duration of the market halt prescribed vide SEBI circular of 28 June 2001 will be suitably reduced by 15 minutes.

With regard to the dynamic price bands, the reference price for the dynamic price band in the pre-open session and subsequent trading sessions will be the previous day's closing price, SEBI said.

While all other conditions remain unchanged, SEBI has directed stock exchanges to take necessary steps and put in place necessary systems for implementation of the provisions of this circular with effect from 1 October 2013.