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Colombo is the financial center of Sri Lanka. Photo: Bernard Gagnon.

Error Trade Triggers Colombo Exchange's Circuit Breakers

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An error trade in the shares of a listed company triggered a market-wide halt on the Colombo Stock Exchange (CSE) today.

Shares in Distilleries Company of Sri Lanka PLC prompted the 30-minute pause due to their trading value of 100 rupees (approximately $0.87) per share in a 1,200-volume execution, down from the closing price of 143.60 rupees (approximately $1.26) per share the previous day.

The volatility safeguards in place on the Sri Lankan bourse ensure that trading is halted if the Milanka Price Index (MPI) drops by more than five percent within the day from the previous market's close.

"A Market Halt is used internationally by stock exchanges as a procedure for volatility management," says the CSE in a press release. "Under such procedures trading may be halted temporarily or, under extreme circumstances, a market may be closed prior to normal close of the trading session."

So-called circuit breakers have become hot topics following the US flash crash, in which the Dow Jones Industrial Average dived by hundreds of points in a short period of time, only to recover twenty minutes later. In Europe, the installation of price limits that will halt trading when breached have been mandated by the Markets in Financial Instruments Directive review.

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