PSE adopts 3-step circuit breaker rule

MANILA, Philippines — The Philippine Stock Exchange (PSE) has adopted a three-phase circuit breaker as another layer to protect investors from what could still be a volatile market as the country battles the coronavirus disease 2019 or COVID-19 pandemic.

Under the new framework, the PSE will impose a 15-minute trading halt when the market falls by at least 10 percent. This will extend to 30 minutes if the main index declines by 15 percent and for one hour if the drop widens to 20 percent.

“Our first step to address this volatility was to reduce the lower static threshold of securities from 50 percent to 30 percent.  We followed this up with the addition of two circuit breaker levels to give the entire market a breather when these are triggered,” said PSE president Ramon Monzon.

The STAR earlier reported that the PSE was looking into a new circuit breaker mechanism as an added cushion for investors amid a volatile market.

No market halt shall be implemented if it will overlap with the five-minute continuous trading period prior to the pre-close and trading-at-last phases of the trading day.

According to the PSE, the circuit breaker levels can only be triggered once per trading day.

This means that if the higher level is breached first, the lower level circuit breaker will no longer be triggered on that trading day.

“The adjustments are emergency measures necessary to protect investors and maintain order in the market,” SEC chairperson Emilio Aquino said.

The SEC approved the implementation of a revised static threshold for all securities effective March 24 to better manage extraordinary volatility in the market.

Trading in a security shall be suspended when its price falls 30 percent below its previous closing price while the 50 percent ceiling will remain to allow stock prices to recover to their optimal level.

The lower static threshold or the floor price for each security was previously pegged at 50 percent below the reference price