China halts stock market circuit breaker

China Central Television (CCTV) – Chinese securities regulators will pause the circuit breaker mechanism from Friday after it was triggered for the second time in a week by Thursday’s stock market slide.

“Currently, the negative effects of the mechanism are greater than the positive effects. Thus, the China Securities Regulatory Commission (CSRC) had decided to suspend the circuit breaker mechanism to maintain market stability,” the CSRC spokesman Deng Ge said in a statement on Thursday night.

The mechanism was introduced with the aim of providing a calm-down period for the market to prevent or reduce hasty market decisions from being made, said the statement, adding that it also aimed at protecting the interests of small-and-medium investors and prevent program trading from further boosting market swings.

The circuit breaker mechanism is a trading curb that stops the market trading for a certain time period when a substantial market fluctuation occurs.

After being introduced into the Chinese stock market at the start of the year, the mechanism was activated twice by major market slumps on Monday and Thursday.

Deng said in the statement that the mechanism “is not the major reason for the market plunge, but it failed to achieve the anticipated effects”.

On Thursday, the mechanism was triggered 12 minutes after the start of trading, as the benchmark CSI300 index fell by 5.38 percent. After a 15-minute suspension of trading, it was triggered again within two minutes as the index continued to drop to 7.21 percent below the previous day’s close.

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