What is Circuit Breaker in PSX
The Pakistan Stock Exchange (PSX) employs a circuit breaker device to avoid high volatility and rapid price swings in the stock market. It is an automated trading pause that occurs when the market index falls significantly.
The circuit breaker method is intended to mitigate the impact of panic selling and provide investors with time to reconsider their positions. It is also meant to avoid market collapses and to keep the stock market trade orderly.
When the KSE-30 Index falls by 4%, the PSX circuit breaker trips. Trading is paused for 45 minutes when this occurs. If the index falls another 5%, trading is halted for the rest of the day.
The circuit breaker system is an important tool used by stock exchanges all around the globe to minimize significant market volatility and maintain investor trust.