OMX Nordic Exchanges in Helsinki, Iceland, Stockholm and Copenhagen have decided to adopt circuit breakers to reduce uncertainty during volatile periods.
In addition, trading safeguards to avoid erroneous orders will be introduced. The set-up of circuit breakers and trading safeguards is based on the results of a customer consultation carried out in 2006.
Circuit breakers will be implemented on equities, including First North, in addition to investment funds and ETFs.
Circuit breakers interrupt matching for up to 4 minutes when the price movements in a security become relatively large. The purpose is usually to give the market participants a few minutes to evaluate any new information, reconsider their interests or remove any erroneous orders.
Circuit breakers have two types of reference prices: a static price and a dynamic price range. When a circuit breaker is triggered continuous trading is interrupted by a brief call auction.
Trading safeguards are to be used simultaneously with circuit breakers. A trading safeguard rejects orders that deviate significantly from last traded price. Compared to circuit breakers the price range for the safeguards will be wider and the purpose of the safeguards is primarily to avoid erroneous order entries.
The circuit breakers and trading safeguards functionality on the Helsinki, Iceland, Copenhagen and Stockholm markets will be implemented in conjunction with the next SAXESS release, scheduled for 2 June 2008.