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NSE plans to widen index circuit breaker

04 July 2013, 15:00

Lagos - There are indications that the Nigerian Stock Exchange (NSE) may further widen the scope of its index circuit breakers to check free fall of the All-Share index.

The News Agency of Nigeria (NAN) reports the new rule is to check the fall of the All-Share Index by as much as five per cent in a day.

NAN reports that circuit breakers are measures used by stock exchanges to check large sell-offs of in stocks that can trigger panic selling.

The NSE currently has one circuit breaker that allows 10 per cent daily price movement (up or down) in a day by all the listed equities.

An official of NSE, who pleaded anonymity, told NAN in Lagos on Thursday that the NSE was not comfortable with the fall of All-Share Indexl by 3.88 per cent on June 13.

The source told NAN that the scope of the current circuit breaker was too low when compared with the nature of trading and what was obtained in advance countries.

He said that the proposal to expand the circuit breaker had been forwarded to the Securities and Exchange Commission (SEC) for approval.

The source told NAN that the new rule, tagged Rule on Trading Halt Due to Extra Ordinary Market Volatility (Index Circuit Breakers), would be introduced soon.

According to the source, the NSE will no longer accept market volatility that will lead to a drastic fall in the All-Share Index in a day.

He said that the circuit breaker, when introduced, would halt trading on all securities for 30 minutes whenever severe market volatility occurred.

“The aim of the halt is to allow the capital market participants to access the market decline and influence further decline.

“The NSE needs to be proactive to ensure market stability because of the improvement in market technology that ensures online transactions daily.

“Index circuit breakers operate in other advanced capital markets and Nigerian should not be left out to avoid unnecessary recession,” he said.

He told NAN that the New York Stock Exchange had three circuit breaker levels of 10 per cent, 20 per cent and 30 per cent for every quarter.

 - NAN

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