The main difference between China's price limit system and foreign countries is that after the stock price reaches the price limit, it does not completely stop trading, but the trading within the price limit or within the price limit can continue until the close of the day.
The price limit system originated from the early foreign securities market. It is a trading system in the securities market to properly limit the fluctuation of the price of each stock on the same day in order to prevent the price from soaring and plunging and curb excessive speculation, that is, it stipulates that the maximum fluctuation range of the trading price in a trading day is a few percent above and below the closing price of the previous trading day, and trading will stop after exceeding it.
Extended data:
The price limit refers to the situation that a futures contract has a buy (sell) declaration with a stop-loss price, a sell (buy) declaration without a stop-loss price, or a transaction is made as soon as a sell (buy) declaration is made, but the stop-loss price is not set within 5 minutes before the closing of the trading day.
Under the price limit system, the settlement price of the previous trading day plus the maximum allowable increase constitutes the upper limit of the price increase of that day, which is called the daily limit; The settlement price of the previous trading day MINUS the maximum allowable decline constitutes the lower limit of the price decline, which is called the daily limit.
Therefore, the price limit is also called the maximum fluctuation limit of daily price. There are two forms of price limit range: percentage and fixed quantity.
The determination of price limit mainly depends on the frequency and amplitude of price fluctuation in the spot market of the commodity. Generally speaking, the more frequent and violent the price fluctuation of a commodity, the greater the daily stop loss of the commodity futures contract; On the contrary, it is smaller.
The daily settlement system is established because the risk can only be controlled within one trading day. If the futures price fluctuates violently during the trading day, it may still cause large-scale losses or even overdrafts in the margin accounts of members and customers, and it will be difficult for futures exchanges to guarantee the performance of contracts and control risks.
The implementation of the price limit can effectively slow down and restrain the ups and downs caused by some unexpected events and excessive speculation on futures prices, slow down the price fluctuations in each trading day, and control the losses of exchanges, members and customers within a relatively small range.
Moreover, because this system can lock in the maximum profit and loss of the contracts held by members and customers every trading day, it creates favorable conditions for the implementation of the deposit system. This is because as long as the amount of margin charged to members and customers is greater than the amount of possible losses within the fluctuation range, it can be guaranteed that futures prices will not be overdrawn when they fluctuate to the daily limit or the daily limit.
Baidu encyclopedia-daily limit board