CircuitBreaker, also known as automatic stop mechanism, refers to the measures taken by the exchange to stop trading when the stock index fluctuation reaches the specified fuse point.
Specifically, it is a mechanism to set a fuse price for the contract before the contract reaches the price limit, so that the contract trading quotation can only be traded within this price range for a period of time.
"fuse mechanism" generally adopts two forms of fuse mechanism in foreign exchanges, namely "melting off" and "melting on"; The former means that when the price touches the fuse point, the transaction will be suspended for a period of time, and the latter means that after the price touches the fuse point, the transaction declaration will continue to match the transaction within the fuse price range for a period of time. The fuse mechanism of "fuse and break" is widely used in the world.
China's stock index futures will soon introduce a fuse system, which is based on the 10% price limit of individual stocks in the stock spot market, in order to curb irrational excessive fluctuations in the stock index futures market. According to the design, when the daily fluctuation range of stock index futures reaches 6%, it is the first melting point of Shanghai and Shenzhen 300 index futures trading, and it will "continuously fuse" within this range. When reaching the "melting point", you can still trade 10 minutes, but the index quotation cannot exceed 6%. After 10 minutes, the fluctuation range is enlarged to 10%, corresponding to the daily limit of individual stocks in the spot market 10%.