Beijing mulls stock market circuit-breakers in event of abnormal market swings

Chinese regulators are grappling to control price swings in a stock market that has lost US$5 trillion (S$7 trillion) in value since its June peak.
Chinese regulators are grappling to control price swings in a stock market that has lost US$5 trillion (S$7 trillion) in value since its June peak. PHOTO: REUTERS

BEIJING (Bloomberg) - China is considering imposing circuit-breakers to temporarily shut down stock trading in the event of "abnormal" fluctuations, Xinhua News Agency reported.

Trading would halt for an unspecified period of time in the event of a substantial drop, Xinhua reported late Sunday (Sept 6), citing an unidentified official from the China Securities Regulatory Commission. The regulator will also scrutinise algorithmic trading, curb speculation on index futures and step up regulation covering stock financing, Xinhua said.

Chinese regulators are grappling to control price swings in a stock market that has lost US$5 trillion (S$7 trillion) in value since its June peak. In a statement on its website yesterday (Sept 6), the CSRC said it would continue to take action to stabilise the market when abnormal volatility poses systemic risks.

Under current rules, individual stocks and index futures can rise or fall by no more than 10 per cent per day from the previous closing level.

China should learn from developed economies how to improve market regulation after the stock rout exposed problems including insufficient oversight and excessive speculation, Xinhua reported, citing the official.

In the last two weeks, China has moved to limit trading of stock-index futures by lowering the bar for what it called "abnormal trading" and increasing margin requirements and settlement fees.