Why does the exchange stop trading your shares?
Why are exchanges suspended? In general, this is in a company will issue a major impact on operating wealth of large-scale announcement completed. Stock trading is stopped so that this news can be widely disseminated, and no one will have an unfair advantage to exploit this information. The strong form of the Efficient Market Hypothesis means that stock prices reflect all public and private information
Even more striking, we saw in Asia January 22, 2008 that the wholesale suspension of all stock trades, sold insane. The Bombay Stock Exchange stopped trading (or, more commonly, broken) for about an hour when the Sensex 30 fell as much as 10%. Continued to fall 13%, resuming trading on the day, closing at 16,729.94, down 4.97%.
Similarly, the Korea Exchange ceased trading as the benchmark index KOSPI 200 fell 6%. This is the fourth time in the exchange history to suspend trading. Stops only 5 minutes, but all the same no deals can be made in Korean stocks.
Why does the exchange stop trading when you desperately get out of your position? The simple answer is to restore calm and order in an emotional trading environment. During an outage, you can not place an order, but some exchanges (depending on their technology) will allow you to cancel the order. Once the calm recovery, the exchange will begin the process of pre-opening period, the last normal trading session will begin.
Each exchange has its own circuit breaker policy. For example, the Korea Stock Exchange on its website:
", all transactions will be suspended if the KOSPI consecutive down 1 minute more than 10% of the previous day's closing price."
I do not know why they stopped it because the benchmark dropped 6% instead of 10% as they explained on their website.
"Once the circuit breaker is exercised, the suspension is for 20 minutes."] The Thai Stock Exchange adopts a two-tier policy. If the SET50 index drops 10% from the previous day's closing price, all listed securities will be suspended for 30 minutes. In the second phase, if the SET50 index drops 20% from the previous day's close (ie another 10%), all listed securities will be suspended for one hour. The Bursa Malaysia has a tier 3 trading moratorium of 10%, 15% and 20%. The Japanese market, TSE and OSE have circuit breaker strategy, depending on the theoretical price of the index. Different levels trigger different price changes. Trading is suspended for 15 minutes.
The concept of a circuit breaker was introduced in November 1992 to discourage extreme trade movements and to impose an otherwise unjustifiable risk on the part of the Hong Kong Exchanges and the Australian Stock Exchange
Trade environment. Strangely, Tuesday, March 9, 1993, was the Bombay Stock Exchange, the first time a stall-stowed exchange was made when Sensex switched from 2451.20 to 2318.26 (down 5%).