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SEBI mulls 12% circuit breaker across-the-board

Girish Singhal

NEW DELHI, Jan. 18

THE Securities and Exchange Board of India (SEBI) is planning to introduce the circuit breaker limit of 12 per cent across-the-board if it helps in improving liquidity and restricting speculation in those 100 scrips in which it will be applicable with ef fect from January 24.

According to Mr. Bharat Bhushan Sawhney, President DSE, ``the main idea behind introducing a higher circuit breaker limit is to prevent rising speculation in the country's stock markets and provide a better entry/exit route to investors. The speculation will get suppressed as it is comparatively difficult to manipulate a share price with a circuit breaker limit of 12 per cent as against the present circuit breaker limit of eight per cent.''

The system of price band was relaxed by SEBI last week by allowing a further four per cent fluctuation over the present eight per cent limit after a cooling-off gap of half-an-hour. ``This half-an-hour gap is crucial in restricting sudden volatility in a ny scrip. This apart, according to our past experience, the four per cent additional fluctuation after the cooling-off period will give an opportunity to an investor to enter or exit from a scrip without waiting for the next day,'' he said.

Mr. Sawhney, who participated in SEBI-constituted Inter-Exchange Market Surveillance Group (ISG) meet held recently in Mumbai to discuss the circuit breaker issue, further pointed out that the list of 100 shares will be announced on January 22 and will c ontain high volume shares from both the specified as well as the cash section. The list is also likely to contain scrips in the compulsory rolling settlement as against the earlier reports stating that the higher circuit breaker limit will not be applica ble to such scrips, he said.

Asked about the logic behind introducing a higher circuit breaker limit in only a limited number of scrips, Mr. Sawhney said that it was difficult for regional stock exchanges such as Delhi, Calcutta and Ahmedabad stock exchanges to implement the revised ceiling limits across-the-board immediately due to lack of infrastructure available with them. Therefore, the new limit will initially be applied to a select batch of just 100 scrips. The decision will be reviewed by the ISG at its next meeting.