What are Price Bands and Circuit Breakers?
Price Bands (applicable to stocks) and Circuit Breakers (applicable to indices) are SEBI prescribed, pre-defined values that trigger automatic checks in cases of drastic price movements of a stock or index. It is expressed in percentage (%) terms and includes price movements in either direction- upwards or downwards.
A Price Band is the range within which the price of a particular stock is permitted to fluctuate.
- The Ceiling Price/ Upper Circuit is the highest price within the range that the stock can reach in a day.
- The Floor Price/ Lower Circuit is lowest price within the range that the stock can reach in a day.
- Any orders placed outside the applicable price range will be rejected by the exchange.
Exchanges determine daily price bands for listed stocks based on their closing price on the previous day. They are assigned based on the need to control volatility. Hence, stocks are assigned one of the following:
Daily price bands of 2% / 5% / 10%.
A price band of 20% for the remaining scrips, including debentures, preference shares, etc.
A price band of 20% for the auction market.
Price bands are not applicable to securities on which derivative products are available. For them, the exchange has se previous day's closing price, which shall be flexed based on pre-defined criterion.
A Circuit Breaker is a market-wide price band that is index-based and triggered by movements in the BSE Sensex (BSE) or NIFTY (NSE).
- When either of these indices reaches its lower/ upper circuit limit, there is a trading halt in all equity and derivatives segments nationwide.
- This system is enforced in 3 stages (10%, 15%, and 20%):
|Trigger Movement||Trigger Time||Market Halt Duration|
|10%|| Before 1:00 p.m.|| 45 minutes|
|10%||Between 1:00 p.m. - 2:30 p.m.||15 minutes|
|10%||At or after 2:30 p.m.||No trading halt|
|15%||Before 1:00 p.m.||1 hour 45 minutes |
|15%||Between 1:00 p.m. - 2:00 p.m.||45 minutes|
|15%||At or after 2:00 p.m.||Trading halted for the remaining day |
|20%||Anytime ||Trading halted for the remaining day |
Visit the NSE website to learn more about price bands and circuit breakers .