New Circuit Breaker Rules of NEPSE

Circuit breaker is a financial regulatory instrument that is in place to prevent stock market crashes from occurring. Circuit breakers have been modified to prevent both speculative gains and dramatic losses within a small time frame. As a result of it being triggered, circuit breakers either stop trading for a certain minutes or close trading for entire day.

The main objective of circuit break is to control the stock market movements for unreasonable fluctuations. Trading halt gives market participants time to analyze event, news, announcements and take necessary rational decision.

How Circuit Breakers are used in Nepal Stock Exchange (NEPSE)

Nepal Stock Exchange (NEPSE) has implemented index based circuit breakers with effect from 2064/06/04 (Sept 21, 2007). In addition to the index based circuit breakers, price range is also applicable on individual securities.

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Index Based Circuit Breakers

The index-based circuit breaker system applies at 3 stages of the NEPSE index movement of 4%, 5% and 6%. Earlier index based circuit breaker applies at 3%, 4% and 5% respectively which was amended on 19^th Chaitra 2075 (1 Apr, 2019). These circuit breakers when triggered bring about a trading halt in all securities.

      a)     In case of 4% movement either way: Market would halt for 20 minutes if the movement takes place during first hour of trading i.e. 11:00 AM to 12:00 PM. In case this movement takes after 12:00 PM there will be no trading halt at this level and market shall continue trading.

      b)    In case of 5% movement either way: Market would halt for 40 minutes if the movement takes place between 12:00 PM to 1:00 PM. In case this movement takes after 1:00 PM there will be no trading halt at this level and market shall continue trading.

For Example: Suppose the index of NEPSE has decreased by 5.02% at 12:32 PM in the second trading hour i.e 12:00 PM to 1:00 PM. Market will resume after 40 minutes halt i.e. at 1:12 PM onwards.

       c)     In case of 6% movement in either way: Trading shall be halted for the remainder of the day if the movement takes place after 1:00 PM or any time during the market hour. No trading shall be done for the day after 6% of movement in NEPSE.

Current Index based circuit breaker can be shown in chart as follows:

Time	Movement	Halt Period
11:00 AM to 12:00 PM	4% either way	20 minutes
12:00 PM to 1:00 PM	5% either way	40 minutes
After 1:00 PM	6% either way	Rest of the day

Earlier Index based circuit breaker can be shown in chart as follows:

Time	Movement	Halt Period
11:00 AM to 12:00 PM	3% either way	15 minutes
12:00 PM to 1:00 PM	4% either way	30 minutes
After 1:00 PM	5% either way	Rest of the day

Price Range

Price Range is applicable on individual securities of the companies listed in NEPSE. The circuit breaker for individual securities applies at 10% price movement on either side (positive or negative). The stock cannot trade at a price higher or lower than 10% of the last traded price.

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Market Timing of NEPSE

Trading on equities takes place on all days of week (except Saturdays and holidays declared by exchange in advance). On Friday only odd lot trading (trading of less than 10 shares) is done. Currently, trading of shares listed at the Nepal Stock Exchange (NEPSE) starts at 11:00 AM and ends at 3:00 PM for 4 hours. The market opens on Sunday and Close on Friday.