The index-based circuit breaker system, which is already in place, brings to halt trading in all equity and equity derivative markets in case of a steep swing in share movements of BSE's Sensex or NSE's Nifty.

There is a trading halt in all equity and equity derivative markets on 10 percent, 15 percent and 20 percent movement either way of Sensex or Nifty.

In a circular, Sebi has asked NSE and BSE to "compute their market-wide index (Nifty and Sensex respectively) after every trade in the index constituent stocks and shall check for breach of market-wide circuit breaker limits after every such computation of the market-wide index."
     
In the event of breach of market-wide circuit breaker limit, stock exchanges will stop matching of orders to bring about a trading halt. All unmatched orders present in the system will thereupon be purged by the stock exchange.

Besides, exchanges have been directed to implement suitable mechanism to ensure that all messages related to market-wide index circuit breakers are given higher priority over other messages, Securities and Exchange Board of India (Sebi) said.

Further, the systems (including the network) for computation of market-wide index, checking for breach of circuit breaker limits and initiating message to stop matching of executable order and acceptance of fresh orders, would not be used for any other purposes.
     
With the view to identifying improvements, exchanges will include a review of index based market-wide circuit breaker mechanism in their annual system audit.
     
The directions are based on the recommendations of Sebi's Technical Advisory Committee and Secondary Market Advisory Committee. The move will help in further strengthening the mechanism of index based market-wide circuit breaker.

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