Volatility interruption
A volatility interruption (engl. Volatility interruption or Circuit Breakers ) is a capital market event in which due to a conspicuous large deviation of an indicative share price by low liquidity or highly price sensitive events of the continuous trading is temporarily interrupted ( stop trading ).
backgrounds
The volatility interruption serves as a protective mechanism to protect buyers and sellers from unusually high premiums or discounts B. could also result from incorrect entry of price limits. The volatility interruption is triggered by the respective stock exchange if an indicative price deviates too far from previous trading prices. An indicative price is the price at which the securities could be traded based on the appropriate combination of supply and demand (matching). Depending on the level and degree of the volatility interruption, trading is suspended for a short-term auction for a few minutes or until the exchange has convinced itself of the correctness of the bids through a telephone inquiry.
One of the main tasks in the event of volatility interruptions is assigned to the designated sponsors . Immediately after the interruption occurs, these provide corresponding buy and sell prices that adjust the liquidity in the traded security again.
Fast Market
In special market phases, for example when particularly turbulent trading is expected, many exchange operators can call a so-called "fast market" for a product, a product group or the entire market. With this status, the protection mechanism of the volatility interruption is somewhat defused by expanding the limits for the interruptions. This means that larger price deviations from the last exchange rate are possible without an interruption in volatility.
After the terrorist attacks on September 11, 2001 in the USA, a fast market was declared. In the context of the financial crisis from 2007 , for example , the fast market rules were repeatedly applied to the Xetra trading system .
See also
Web links
- Deutsche Börse: Designated Sponsor Guide (PDF file; 2 kB)