Bursa Malaysia already has in place market safeguards such as the circuit breaker to counter any heightened volatility arising from adverse market movements.
The circuit breaker, which was implemented by Bursa Malaysia in March 2002, was designed to trigger automatically when the Kuala Lumpur Composite Index (KLCI) records a 10% decline from the previous day’s closing level. Once the circuit breaker is triggered, the exchange will implement a trading halt for a specified period of time. When the circuit breaker is triggered, trading on equity linked derivatives products such as FKLI, OKLI and SSF will also be halted as well.
“This broad based approach addresses excessive downward movement in the stock market and is designed to enhance market stability when large declines are experienced during a trading day,” said Chief Executive Officer of Bursa Malaysia Berhad, Dato’ Yusli Mohamed Yusoff. “The circuit breaker will give investors time to assess the market conditions and rebalance their buy and sell orders when trading resumes.”
“We will continue our close monitoring of the financial and risk exposures of the equities and derivatives brokers, especially under the current market environment,” said Dato’ Yusli. “We will take the necessary proactive measures to ensure the continuation of a fair and orderly market place.”
For more information on the circuit breaker, please refer to:
http://www.bursamalaysia.com/website/bm/trading/circuit_breaker.html