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.
The circuit breaker, which was implemented by Bursa Malaysia in March 2002, was designed to trigger automatically when the Kuala Lumpur Composite Index (KLCI) records a 10% decline from the previous day’s closing level. Once the circuit breaker is triggered, the exchange will implement a trading halt for a specified period of time. When the circuit breaker is triggered, trading on equity linked derivatives products such as FKLI, OKLI and SSF will also be halted as well.
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: