Colombo stock market circuit breakers to thwart huge price falls

The Securities and Exchange Commission of Sri Lanka (SEC), with share prices likely to fall sharply when the stock market reopens amidst the COVID-19 pandemic, is introducing a ‘Three Tiered Circuit Breaker’ attached to the S&P SL20 Index, to deal with uncertain market conditions when the market reopens. 
In a statement two days ago, the SEC said that a Three Tiered Circuit Breaker structure is hereby introduced in order to strengthen the capital market and ensure that precautionary measures are in place to eradicate distortion in the S&P SL20 Index by providing a layered approach as enumerated below;
The Three Tiered Circuit Breaker Structure is as follows, according to the SEC statement:
i. First Circuit Breaker –After commencement of trading of the Colombo Stock Exchange (CSE) for the day, a Market Halt to be imposed for 30 minutes in the event the S&P SL20 index drops by 5 per cent.
ii. Second Circuit Breaker – Having re-commenced trading after the cooling off period of 30 minutes following the S&P SL20 drop of 5 per cent, if the S&P SL20 index drops again by another 2.5 per cent, a Market Halt to be imposed for another 30 minutes.
iii. Third Circuit Breaker - Upon re-commencing trading subsequent to cooling off period of 30 minutes following the S&P SL20 drop of 2.5 per cent (altogether S&P SL20 has dropped by 7.5 per cent) if the S&P SL20 index drops by a further 2.5 per cent (S&P SL20 index has then fallen altogether by 10 per cent for the day), trading will be halted and the market shall be closed for the day.
“The CSE is hereby directed to implement the aforementioned Three Tiered Circuit Breaker structure. The aforesaid circuit breaker mechanism shall take effect from the date the market re-opens and shall remain in force until further notice notwithstanding anything to the contrary contained in the ATS or the CDS Rules of the CSE or any decision of the Board of Directors of the CSE that may have been taken in respect of market wide circuit breakers. The CSE is further directed to inform all broker members and participants of the CDS forthwith of this directive,” the statement said.