How did the exponential fuse mechanism come from? The financial manager told you.
The purpose of setting up the fuse mechanism is to let investors have a cooling-off period when the price suddenly changes, so as to prevent overreaction.
France, Japan, South Korea and other countries have also adopted the fuse mechanism. There are two forms of fuse system abroad: fuse type and melt stop type.
Melting is to stop trading for a period of time after the price touches the melting point. Continuous fuse means that when the price touches the melting point, it continues to trade for a period of time, but the quotation is limited to the melting point.
The fuse mechanism originated in America. Judging from its development history, its forms are various, but they are all characterized by artificially setting price limits and interrupting transactions. The Chicago Mercantile Exchange (CME) once imposed a 3% price limit on the daily trading price of the Standard & Poor's 500 index futures contract at 1982, but this regulation was abolished at 1983, and it was not until the stock market crash at 1987 that people reconsidered the price limit system.
On the first anniversary of June 1988, 10, 19, and June 1987, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) approved the fuse mechanisms of new york Stock Exchange (NYSE) and Chicago Mercantile Exchange (CME).
The fuse mechanism is divided into three levels: the first level is down 7%, the second level is down 13%, and the third level is down 20%. Between 9: 30 a.m. and 3: 25 p.m., the primary or secondary fuse mechanism is triggered, and the transaction will be suspended for 15 minutes; Trigger the three-level fuse mechanism and suspend trading on the same day.