abhishreshthaa
Abhijeet S
Market Wide Circuit Breakers (MWCBs)
MWCBs are bands, at various percentage levels above and below the previous closing level of the index (SENSEX or NIFTY).
Trading is halted, either temporarily or for the rest of the day depending upon the time and the level the index breaches these bands.
IMPORTANCE
To prevent excessive intraday volatility of the index.
How it works?
Whenever market shows excessive volatility, MWCBs are brought into force and trading is halted for a specified time.
Where it can be applied ?
MWCBs are bands, at various percentage levels above and below the previous closing level of the index (SENSEX or NIFTY).
Trading is halted, either temporarily or for the rest of the day depending upon the time and the level the index breaches these bands.
IMPORTANCE
To prevent excessive intraday volatility of the index.
How it works?
Whenever market shows excessive volatility, MWCBs are brought into force and trading is halted for a specified time.
Where it can be applied ?
- On October 27 1997, circuit breakers caused the NYSE to halt trading for the first time in history as the Dow Jones Industrial Average crashed by 554 points.
- On May 17, 2004 MWCBs were applied twice
- Sensex came down form the previous day’s close of 5069.87 to 4549.62, a fall of 10.126 %. ( Trading halted for 1 hour ).
- Trading resumed and again the market fell to 4227.5, a fall of 16.61 % in the next few minutes. ( Trading halted for 2 hours)