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.
The fuse mechanism originated in the United States, and the Chicago Mercantile Exchange of the United States imposed a 3% price limit on the daily trading price of the S&P 500 index futures contract 1982. 1988 The Commodity Futures Trading Commission and the Securities and Exchange Commission of the United States approved the fuse mechanisms of the new york Stock Exchange and the Chicago Mercantile Exchange. According to the latest regulations of the SEC, when the S&P index drops by 7% in a short time, all securities market transactions in the United States will be suspended for 15 minutes.
According to incomplete statistics, all countries in the world have fuse systems. In addition to China, French, Japanese, Finnish, Australian, Indian, Malaysian and other countries have restrictions on triggering fuse. Among them, the Philippines has a larger range, with the price limit of 40% of the previous day's share price, while Egypt has a smaller range, only 5%.
Domestic mechanism
In order to control risks and reduce market fluctuations, in addition to the price limit system, China has also introduced a new price fuse mechanism in stock index futures trading. The limits of fuse and price limit are set by the exchange, which can adjust the limits of fuse and price limit of futures contracts according to market risks.
Initial condition
After the daily opening, whenever the declared price of a contract touches the fuse price for one minute, the fuse mechanism of the contract will start.
Start-up steps:
1. Within ten consecutive minutes after the fuse mechanism is started, the declared contract price shall not exceed the fuse price, and the transaction shall continue. Ten minutes later, the limit of fuse fluctuation is cancelled, and the limit of 10% takes effect.
2, when there is a fuse price declaration, enter the inspection period. The inspection time is one minute. During the inspection, the declared price is not allowed to exceed the fuse price, and the declaration exceeding the fuse price will be prompted.
3. If the fuse inspection period is not completed and enters the non-trading state, the fuse inspection period will automatically end, and when it enters the tradable state again, the fuse inspection period will be recalculated.
4. Less than 10 minutes after the fuse mechanism is started, the market will enter a non-trading state. After the transaction is restarted, the limit on the fluctuation of the fuse is cancelled, and the limit on the fluctuation of 10% takes effect.
5. The fuse mechanism will not be started within 30 minutes before the market closes every day, but if there is an already started fuse period, it will continue to be executed until the end of the fuse period.
6. The fuse mechanism is only started once every trading day, and there is no fuse mechanism on the last trading day.
Remarks: When futures contracts are declared at the fuse price or the price of the price limit, the principle of closing positions first and time first shall be implemented in the transaction matching.