The main purpose of the fuse mechanism is to provide a "cooling-off period" for the market, avoid or reduce hasty decisions under large fluctuations, and protect the legitimate rights and interests of investors, especially small and medium-sized investors; The effect of suppressing programmed trading to help rise and fall; Provide emergency response time to deal with technical or operational risks.
The fuse mechanism refers to setting a fuse price for the contract before it 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 price of Shanghai and Shenzhen 300 index futures contracts is 6% of the settlement price of the previous trading day. When the market price reaches 6% and lasts for one minute, the fuse mechanism starts. In the next ten minutes, the declared price can only be less than 6%, and the transaction will continue. More than 6% applications will be rejected. Ten minutes later, the daily limit was enlarged to 10%. 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.
After the daily opening, when the declared price of a contract touches the fuse price for one minute, the fuse mechanism of the contract is started.
(1) Within ten minutes after the fuse mechanism is started, the declared contract price shall not exceed the fuse price, and the transaction shall continue. Ten minutes after the fuse mechanism is started, the fuse limit is cancelled, and the 10% limit takes effect.
(two) when a contract appears to declare the fuse price, it begins to enter the fuse inspection period. The fuse inspection cycle is one minute. During the fuse inspection, the declared price is not allowed to exceed the fuse price, and appropriate tips are given for the declaration exceeding the fuse price.
(3) If the fuse inspection period is not completed, it will enter the non-trading state and the fuse inspection period will automatically end. When entering the tradable state again, the calculation of the fuse check cycle starts again.
(4) If the market enters a non-trading state less than 10 minutes after the fuse mechanism is started, the limit on the price increase and decrease of the fuse will be cancelled, and the limit on the price increase and decrease of 10% will take effect after the transaction is restarted.
(five) within 30 minutes before the daily closing, the fuse mechanism is not started, but if the fuse period has been started, it will continue to be implemented until the end of the fuse period.
(six) the fuse mechanism is only started once every trading day, and there is no fuse mechanism on the last trading day.
Suspension mechanism
The fuse mechanism is not the main reason for the market crash, but judging from the actual fuse situation in the last two times, it has not achieved the expected effect. The fuse mechanism has a certain "magnetic attraction effect", that is, some investors trade in advance when they are close to the fuse threshold, which leads the stock index to reach the fuse threshold at an accelerated rate, which has contributed to the decline. Weighing the pros and cons, the current negative effects outweigh the positive effects. Therefore, in order to maintain market stability, the CSRC decided to suspend the fuse mechanism.