Circuit Breaker in NEPSE – Everything You Need to Know

What is a circuit breaker in Nepse

Circuit Breaker in NEPSE

What is a circuit breaker in Nepse?

A circuit breaker is a rule adopted by Nepal Stock Exchange to control unreasonable price fluctuation.  If NEPSE index fluctuates 4 % within the first hour of regular trading i.e before 12 pm, trading will be suspended for 20 minutes. If Nepse fluctuates by 5 % within the second hour i.e 1 pm, trading is suspended for another 40 minutes as a second circuit. After that, if the market index fluctuates by 6 %, all transactions for the rest of the day will be suspended.

This halt gives market investors to analyze events, news, announcements and take a necessary rational decision.

NEPSE has implemented an index-based circuit breaker from 21 Sep 2007.  A circuit breaker is a market stabilizing tool used to check sudden rise/fall in the index. The circuit breaker rule was first introduced in the United States in 1987 when Dow Jones Industrial Average (DJIA) plummets 22% in a single day “The Black Monday.” Usually, index-based circuit breakers apply for three levels.

Circuit Breaker Table

Movement Time Halt Period
4% ⬆️ or ⬇️ Before 12 PM 20 minutes
5% ⬆️ or ⬇️ Before 1 PM 40 minutes
6% ⬆️ or ⬇️ Before 3 PM Entire day

Circuit for Individual Stock

There is another concept in Nepse trading, if the price of the individual company increase or decreases by 10% in a single day, it is called circuit-level trading. For example, the price of the ABC scrip can increase or decrease only by 10%. If it increases by 10% it is called a positive circuit and if the price decrease by 10%, it is called a negative circuit.

Note – The trading of stock will not be halted even after a positive or negative circuit like in the NEPSE index. 

circuit of individual stock

History of Circuit Break in Nepse

History of circuit breaker

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