The Hindu Business Line : How the index-based circuit filter works

The circuit breakers get activated at three stages of index (NSE Nifty or BSE Sensex) movement either way at 10 per cent, 15 per cent and 20 per cent. The circuit filters trigger a co-ordinated halt in trading in all equity and equity derivative markets nationwide.

Today the first circuit filter was activated within 20 minutes of opening or when the Sensex fell 550 points. The next was triggered within two minutes of resuming trading at 11.15 a.m.

The percentages are calculated on the closing index value of the quarter. These percentages are translated into absolute points of index variations (rounded off to the nearest 25 points in case of Sensex). At the end of each quarter, these absolute points of index variations are revised and made applicable for the next quarter.

On March 31, 2004, the last trading day of the quarter, the Sensex closed at 5590.60 points. The absolute points of Sensex variation (over the previous day's closing) which would trigger market wide circuit breaker for any day in the quarter between 1st April 2004 and 30th June 2004 are: 550 points for 10 per cent 850 points for 15 per cent and 1,125 points for 20 per cent.

In case there is a 10 per cent movement of wither the NSE Nifty or the BSE Sensex, trading is halted for an hour if the movement is before 1 p.m. In case the movement takes place at or after 1 p.m. but before 2.30 p.m. trading is stopped for half hour. In case the movement takes place at or after 2.30 p.m. there will be no trading halt at the 10 per cent level and the market will continue trading.

In case of a 15 per cent movement of either index, there will be a two-hour market halt if the movement takes place before 1 p.m. If the 15 per cent trigger is reached on or after 1 p.m. but before 2 p.m., there will be a one-hour halt. If the 15 per cent trigger is reached on or after 2 p.m. the trading will halt for the rest of the day. In case of a 20 per cent movement of the index, the trading will be halted for the rest of the day.