"Circuit breaker" has two concepts: broad sense and narrow sense. In a broad sense, it refers to controlling the trading risk of stocks, futures or other financial derivatives and setting interval limits on their single-day price fluctuation range. Once the trading price touches the upper and lower limits of the range, the trading will be automatically interrupted for a period of time ("fuse"), or "flat" will not exceed the upper and lower limits ("fuse hold"). In a narrow sense, it refers to the "fuse" of stock index futures. It is called "fuse" because the principle of this mechanism is similar to that of circuit fuse. Once the current is abnormal, the fuse will automatically blow to avoid electrical damage. The function of "fuse mechanism" in financial transactions is also to avoid excessive price fluctuation of financial transaction products, give the market a certain cooling-off period, warn investors of risks, and win time and opportunities for relevant parties to take relevant risk control measures. [6]

Expression form

There are generally two forms of fuse mechanism adopted in foreign exchanges, namely, "melting off" and "melting non-stop"; 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 the "melting point" is reached, 10 minutes can still be traded, 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%. [ 1]

Introduce the background

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. However, this provision was abolished in 1983, and it was not until 1987 that people reconsidered the implementation of the price limit system.

1987101October19, the biggest crash broke out in new york stock market. The Dow Jones Industrial Average plunged 508.32 points, or 22.6%, in one day. Because there is no fuse mechanism and price limit, many millionaires become poor overnight, which is also called "Black Monday" by American financial circles.

198810 June19, the United States Commodity Futures Trading Commission and the Securities and Exchange Commission approved the fuse mechanisms of the new york Stock Exchange and the Chicago Mercantile Exchange. According to the relevant regulations of the United States, 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. [7]