FAQs
FAQs on Circuit Breaker
- What is a Circuit Breaker?
A Circuit Breaker is a term used for a market-wide approach to manage downward movement of the barometer index by halting trading temporarily in the market during normal trading hours, during which time information is disseminated to all market participants.
Activating a Circuit Breaker provides the opportunity for information dissemination to all market participants, including investors, to make well-considered investment decisions.
Bursa Malaysia designed its Circuit Breaker to trigger automatically when the FTSE Bursa Malaysia KLCI ("FBMKLCI") records a decline of 10%, 15% and 20% within a trading day, based on the previous day's closing index level. This will temporarily halt trading on Bursa Malaysia Securities Berhad and trading of equity linked derivative products on Bursa Malaysia Derivatives Berhad.
- When will the Circuit Breaker be triggered?
The circuit breaker will be triggered when the FTSE based Composite Index (FBMKLCI) declines by 10%, 15% and 20% below its closing index of the previous market day, under these following conditions:
Bursa Malaysia Circuit Breaker Trigger Levels/ Conditions and Trading Halt Duration Trigger Level FBMKLCI Decline From
9:00 a.m.
–
before
11:15 a.m.From
11:15 a.m.
-
12:30 p.m.From
2:30 p.m.
–
before
3:30 p.m.From
3:30 p.m.
-
5:00 p.m.Level 1 FBMKLCI falls by an aggregate of 10% or more but less than 15% of the previous market day's closing index. 1 Hour Rest of Trading Session 1 Hour Rest of Trading Session Level 2 FBMKLCI falls by an aggregate of or to more than 15% but less than 20% of the previous market day's closing index. 1 Hour Rest of Trading Session 1 Hour Rest of Trading Session Level 3 FBMKLCI falls by an aggregate of or to more than 20% of the previous market day's closing index. 9.00 a.m. - 12.30 p.m. 2.30 p.m. - 5.00 p.m. Rest of Trading Day Rest of Trading Day Note:
Trading on Bursa Malaysia is done in two (2) trading sessions from 9.00 a.m. to 12.30 p.m. (morning session) and from 2.30 p.m. to 5.00 p.m. (afternoon session). - Why was it decided to fix the trigger levels at 10%, 15% and 20% decline of the FBMKLCI from the previous market day's closing index?
For Bursa Malaysia, the trigger levels were established on the findings of a study of FBMKLCI movements over a period of time that included instances of a sudden and persistent decline in the FBMKLCI, as well as a comparative study of international best practices in effecting Circuit Breakers in other exchanges.
- How do you calculate the trigger levels for the Circuit Breaker?
There are three (3) trigger levels for the Circuit Breaker which are based on a 10%, 15% and 20% decline of the FBMKLCI from the previous market day's closing index. The following example illustrates how the trigger levels are calculated.
Scenario:
- Assuming the closing index of the FBMKLCI on 30 July is 1800 points. The Circuit Breaker trigger levels for 31 July will then be calculated based on the 30 July closing index using the predetermined percentage levels of 10%, 15% and 20% for each trigger level. The resulting index levels derived from the calculation will then be the effective trigger levels for the day (31 July).
- Once the FBMKLCI declines by the respective trigger levels, trading on the stock market will be halted temporarily.
Table 1: Assuming the previous market day's closing index is 1800 points.
Trigger Level and Percentage Index Points Decline FBMKLCI Circuit Breaker Threshold Level 1 - 10% 180 1620 points Level 2 - 15% 270 1530 points Level 3 - 20% 360 1440 points In this example, the first level of Circuit Breaker on 31 July will be triggered at a 10% decline of 180 points in the FBMKLCI closing index of 1800 points on 30 July. For the second level of Circuit Breaker (15%), the decline will be 270 points while for the third level of Circuit Breaker (20%) the decline will be 360 points.
Therefore, if the FBMKLCI declines below the previous market day's closing index to or below:
- 1620 points - Trading is halted for one (1) hour if triggered at or before 11.15 a.m. or 3.30 p.m. or for the rest of the trading session if triggered at or after 11.15 a.m. or 3.30 p.m.
- 1530 points - Trading is halted for one (1) hour if triggered at or before 11.15 a.m. or 3.30 p.m. or for the rest of the trading session if triggered at or after 11.15 a.m. or 3.30 p.m.
- 1440 points - Trading is suspended for the rest of the day.
- How many times can the Circuit Breaker be triggered during the day?
There may be four (4) situations where the Circuit Breaker could be triggered during the day based on the FBMKLCI's previous market day's closing index, i.e. a decline of:
- 10%, 15% and 20%
- 10% and 20%
- 15% and 20%
- 20%
Thus, the situations show that the FBMKLCI could decline in:
- a staggered manner as in (a); or
- abruptly as in (b) from the 10% to 20% level bypassing the 15% level, (c) 15% to 20% bypassing the 10% level and (d) straight to 20% bypassing the 10% and 15% levels.
In addition to the above, there are two (2) more conditions for the Circuit Breaker framework:
-
Trading halts for each trigger level will occur only once during the trading day.
- For instance, if the previous day's FBMKLCI is at 1000 points and it drops to 855 points (breaching the 10% trigger level), trading will halt for one (1) hour.
- Subsequently, if the FBMKLCI goes up again during the day to 1020 points and then drops to 870, the first level trading halt (i.e. at 10%) will not be triggered as it had already been triggered. This condition applies to all the four (4) situations mentioned above.
-
If FBMKLCI breaches a higher trigger level (e.g. 15%) by bypassing a lower one (e.g. 10%), the lower trigger level (e.g. 10%) will not be triggered during the trading day.
- This condition describes the example in (ii) above, where the FBMKLCI falls abruptly to 15% bypassing the 10% trigger level. In this event, the trading halt in respect of the 10% level decline will not be triggered at all during the day.
- What aspect of trading will the Circuit Breaker affect?
The Circuit Breaker mechanism will only halt trading temporarily when it is triggered. All clearing, settlement and depository operations will function as normal.
For example, if the Circuit Breaker is triggered at 10:00 a.m., all trades matched as at 10:00 a.m. will be cleared and settled as normal according to the T+2 settlement system. All unmatched orders keyed in prior to 10:00 a.m. will continue to be matched upon resumption of trading.
During a halt in trading, the following are permitted in accordance with the Rules of Bursa Malaysia Securities:
- Entry of limit orders
- Client code amendment to trades
- Reducing quantity of orders; and
- Cancellation of orders
- In the event of the Circuit Breaker being triggered, what would happen to the investor's orders?
All matched orders will remain valid. Unmatched and partially-matched orders will remain in the trading system when the Circuit Breaker is triggered at the 10% and 15% levels.
The Exchange reserves the right to cancel unmatched and partially-matched orders when the Circuit Breaker is triggered at the 20% level or when trading halts for the rest of the trading session.
- How would investors know that the Circuit Breaker has been triggered?
In the event a Circuit Breaker is triggered, Bursa Malaysia will immediately disseminate public announcements via its website at www.bursamalaysia.com, media statements and through its network of Participating Organisations.
- When was the last time Bursa Malaysia triggered a Circuit Breaker?
A Circuit Breaker was activated on 10 March 2008, when the composite index fell 130.01 points, more than 10% from the previous close of 1,296.33 points.
Trading on Bursa Malaysia Securities Berhad and on equity-linked derivative products on Bursa Malaysia Derivatives Berhad was halted at 2:58pm. Trading resumed at 3:58pm on the same day, with the composite index closing the day at 1173.22.
- Temporary Market Management and Control Measures - Revised Bursa Malaysia Circuit Breaker Trigger Limits
Effective 20 July 2020, Bursa Malaysia has implemented a temporary market management changes and control measures in BTS2, pertaining to revisions to Static and Dynamic Price Limits for FBMKLCI index component stocks and Bursa Malaysia Circuit Breaker trigger levels. Please refer to the Trading Manual for details of the revisions. The revisions have been currently extended to 30 May 2021.
Temporary Bursa Malaysia Circuit Breaker Trigger Levels/ Conditions And Trading Halt Duration Trigger Level FBMKLCI Decline From
9:00am
–
before
11:15amFrom
11:15 a.m.
-
12:30 p.m.From
2:30 p.m.
–
before
3:30 p.m.From
3:30 p.m.
-
5:00 p.m.1 FBMKLCI falls by an aggregate of 10% or more but less than 15% of the previous market day's closing index. 1 Hour Rest of Trading Session 1 Hour Rest of Trading Session 2 FBMKLCI falls by an aggregate of or more than 15% of the previous market day's closing index. 9.00 a.m. - 12.30 p.m. 2.30 p.m. - 5.00 p.m. Rest of Trading Day Rest of Trading Day A fall in the FBMKLCI may or may not be in a sequential manner i.e. down to 1st level, then to 2nd level, the fall may be abrupt and steep right down to the 2nd level.