After The Turbulence Of The Stock Market In 2015, Regulators Learned A Lesson

The foresight and feasibility of A-share index circuit breaker mechanism was tested on the first day of its official launch in 2016.

According to the relevant rules, the underlying index of circuit breaker is the CSI 300 Index, and the threshold of circuit breaker is divided into 5% and 7%. On the first trading day after the festival, A-share appeared in a big downward posture. While testing the 5% and 7% thresholds, the Shanghai Index fell 6.85%, and the Shenzhen Composite Index and the GEM fell 8.2%. Whether it will be triggered again on the next trading day Fusing mechanism , has become the focus of attention.

There are many reasons to trigger the decline of the stock market, such as shareholders who hold more than 5% of the shares of listed companies regained the freedom to reduce their holdings on January 8, the pressure of making accounts and statements of all funds at the end of the year and the beginning of the year, as well as the year-end ranking assessment. And the market trend in the period before the festival has also been able to verify this logic. However, the circuit breaker mechanism was verified on the day of its official introduction, and this black humor obviously prompted people to focus more on this mechanism itself.

Objectively speaking, the circuit breaker mechanism itself is no problem. From about 1:30 p.m. to the closing of the market, whether noisy or silent, it is also an hour and a half that some market participants really use to think about the market and their own investment behavior.

After the turmoil of the stock market in 2015, the regulators learned from a setback, and the circuit breaker mechanism can indeed play a role in stabilizing the market to a certain extent. Before and after the circuit breaker, investors' education such as the order placing and cancellation of shareholders, and the purchase and redemption of basic people will also follow. But we know that this is not fundamental. For example, the prevention of diseases must be based on a strong body, otherwise, no matter how thoughtful the preventive measures are, it is hard to avoid constant pain. The circuit breaker mechanism developed by the U.S. stock market after the stock disaster, which has no limit on the rise and fall of individual stocks, has not been put into use since the latest rules (2012 version) were issued, which shows that the market itself is ultimately responsible.

This is exactly what anyone who still has hope for China's capital market needs to ponder over one and a half hours after the circuit breaker on the first trading day in 2016 and for a long time in the future, instead of laughing and forgetting in front of the endless stream of jokes.

If the circuit breaker mechanism does not exist, when the Shanghai and Shenzhen 300 have fallen by 7%, and other individual stocks are hard to escape, it is inevitable to reproduce the infectious panic when the stock market plummeted, and it is also easy to lead to collective irrational behavior and transmit it to the futures and other derivatives markets.

　　 Fusing Although the last few stocks are only about 3% or even less away from the limit, it is obviously different from the psychological feeling of actually lying on the limit board for an hour and a half. Even if the decline continues, who can say that the breathing time on the battlefield is not valuable? I'm afraid that letting it fall is just a matter of willpower, but we still need to go back and solve the problem. Circuit breaker just makes the process of solving the problem go ahead.

Of course, circuit breaker mechanism does not work without cost, and it will also affect Market volatility Have a certain impact. When the market decline is close to the threshold, investors may panic to sell because they are worried that the circuit breaker will take effect, leading to the touch of the circuit breaker threshold.

However, it should be noted that this is essentially different from the thousand share limit decline caused by the deleveraging process and the stop loss of priority funds. Moreover, at present, the range of the first level threshold is low (according to historical data, the fluctuation range of almost one trading day every 25 trading days exceeds 5%), and the gap between the second level threshold and the first level threshold setting is too small, only 2 percentage points. Normal transactions may be interrupted more frequently.

In addition, is the index circuit breaker threshold relatively strict for A shares when there are limits on the rise and fall of individual stocks? It is estimated that the touch frequency will also be much higher than that of mature markets such as US stocks. However, any system is a double-edged sword. The key is that the rules should be transparent and fair, so that institutions and retail investors are in the same position. At least, the circuit breaker mechanism that stops block transactions at the same time has achieved this.