Colombo stock exchange to implement new stock market circuit breaker

The Securities and Exchange Commission (SEC) has directed the Colombo Stock Exchange (CSE) to implement the new circuit breaker structure when the market reopens after its closure on 20 March.

The SEC has introduced a new three-tier circuit breaker system on the CSE in a bid to strengthen the country’s capital market and prevent excessive price distortions in the S&P SL20 Index.

Under the new system:

•     The first circuit breaker will trigger a 30-minute market halt if the S&P SL20 index drops 5%.

•     The second circuit breaker will trigger a second 30-minute market halt if the S&P SL20 index drops a further 2.5%.

•     The third circuit breaker will trigger a third market halt if the S&P SL20 index drops a further 2.5% – closing the market for the day.

The SEC has directed the CSE to implement the new circuit breaker structure when the market eventually reopens.

The CSE has been closed since 20 March amid a nationwide lockdown to curb the spread of Covid-19.

“The SEC if of the view that the prevailing conditions are not conducive for the stock market to function in a fair, orderly and equitable manner,” the regulator said at the time