American fuse mechanism We know that the fuse will fuse when the current is too large, thus protecting the electrical appliance. The fuse mechanism means that during the trading process, when the price fluctuation reaches a certain target, the trading will be suspended for a period of time, or the trading can be continued, but the quotation is limited to a certain range.
The fuse mechanism originated in America. 198710 June19, the biggest crash broke out in the American stock market, which is also called "Black Monday" in the financial market. The Dow Jones Industrial Average (HYCM code US30mar20) fell by 22.6% in one day, and the stock index lost $500 billion in 6.5 hours of trading, equivalent to 1/8 of the annual gross national product of the United States.
This stock market crash made people think about how to effectively plunge ceiling prices and reduce losses. Three months later, the US Commodity Futures Trading Commission and the Securities and Exchange Commission introduced the fuse mechanism, which was implemented in February 1988. Initially, the hook finger implements a two-stage fuse threshold:
When the Dow Jones index fell 250 points, trading was suspended 1 hour.
When the Dow Jones index fell 400 points, trading was suspended for two hours.
At the beginning of 1997, the United States raised the two fuse thresholds to 350 points and 550 points respectively. However, the "lightning crash" of US stocks in May 20 10 failed to trigger the fuse mechanism, prompting the United States to modify the fuse mechanism.
The latest revised rules came into effect on April 8, 20 13. According to the closing price of the Standard & Poor's 500 Index (HYCM code US500mar20) in the previous trading day, this fuse mechanism is divided into three levels:
1) The first-level fuse mechanism, which is triggered when the S&P 500 index falls by 7% before 15: 25 EST, and the trading is suspended for 15 minutes; 2) The second fuse mechanism, which is triggered when the S&P 500 index drops by 13% before 15:25 EST, and the trading is suspended for 15 minutes; 3) The third-tier fuse mechanism is triggered when the S&P 500 index falls by 20% at any time on the trading day, and all transactions are suspended for the rest of the day.
The purpose of fuse is to give the market a cooling-off period, so that investors can fully digest market information and prevent irrational large fluctuations in the market or a product. Last night, less than five minutes after the opening of the US stock market, the Standard & Poor's 500 Index (HYCM code US 5000 mar 20) fell by 7%, triggering the first-level fuse mechanism, and the three major US stock indexes were suspended for 15 minutes. After the resumption of trading, the three major stock indexes all rebounded, reflecting that the panic in the market has eased after the fuse.
In addition to US trading hours, in non-US trading hours, if stock index futures rise or fall by 5%, it will also trigger the fuse mechanism. After the fuse is triggered, futures contracts whose price increases or decreases by more than 5% can only be traded at or above the price when the fuse is triggered, and cannot be traded at a lower price. Within a few minutes of the opening of US stock futures on Monday morning, the mini Standard & Poor's 500 index futures fell by 5% to 28 19, triggering the fuse mechanism and limiting the further decline of futures contract prices.
In addition to the fuse mechanism for the stock market, the SEC also has a "maximum price fluctuation upper and lower limit" mechanism for individual stocks, that is, if the price rises or falls by more than 5% within 15 seconds, the trading of this stock will be suspended for 5 minutes, but the fluctuation space of the opening price and closing price of stocks with a price below $3 can be relaxed to 10%.
The fuse mechanism in other countries is not unique to the United States. France, South Korea, Japan, Finland, Australia and other countries have restrictions on triggering fuse, but the degree of restrictions is different. For example, the limit set by the Philippines is 40%, the limit set by countries such as South Korea and Singapore is 10%, and the limit set by Egypt is even smaller, only 5%. On Monday, in addition to the United States, the stock markets in Brazil and Kuwait also triggered the fuse mechanism. Let's list the fuse mechanisms in several countries:
The Tokyo Stock Exchange of Japan launched the fuse mechanism in February, 1994. When the stock price fluctuates beyond a certain range, trading will stop 10 minute. Its fuse threshold is to set different fuse thresholds according to different benchmark stock prices. For example, the benchmark stock price is between 100-200 yen, and the stock price fluctuates more than 50 yen, triggering a fuse; When the benchmark stock price is between 15000-20000 yen and the stock price fluctuates more than 4000 yen, the fuse will be triggered.
If the fluctuation of FTSE 100 index (HYCM code UK 100mar20) exceeds 3% of the dynamic reference price or 8% of the static reference price, a five-minute call auction will be implemented, that is, the execution period will be automatically terminated.
According to the different forms of stock trading, France has different ups and downs and suspension time. The biggest increase of each stock in the whole day is 2 1.25% of the closing price of the previous day, and the biggest decrease is 18.75%. If the price fluctuation exceeds 10% of the previous day, the transaction will be suspended for 15 minutes.
China 20 16 1.4 introduced the fuse mechanism. The index of A-share fuse target is Shanghai and Shenzhen 300 Index (HYCM code CN300mar20). The fuse thresholds are 5% and 7%. After the index triggers a 5% fuse, the securities within the fuse range will be suspended 15 minutes. However, if 5% or 7% is triggered later, such as 14:45 to 15:00, the trading will be suspended until the market closes. The mechanism was finally cancelled due to four fuses in four days.
After the fuse, the market went to the fuse mechanism, which played a role in slowing down the price drop when the market fell rapidly. They can help restore calm and even build market confidence. However, the number of fuses in the history of various countries is limited, and there is not enough evidence to show that panic selling will be reduced when the transaction resumes after the fuse.
After the fuse mechanism was introduced in the United States,1triggered once on October 27th, 1997. On the same day, the Dow Jones Industrial Average (HYCM code US30mar20) plunged 550 points, or 7. 18%, to close at 71.15, a record high of 19 15. The next day, the Dow rebounded sharply by 337. 17 points, or 4.7 1%, to close at 7498.32 points.
20 13 on may 23rd, the Nikkei 225 index (JPN225mar20) futures were suspended at 14:28, 14780 yen local time. Since then, the Nikkei index has continued to fall sharply, with the highest drop of 8.6% in three days. 20 16 On June 24th, Nikkei index futures triggered the fuse mechanism, and Japanese stock futures trading was suspended 10 minute. The next day, the Nikkei index sent a signal to stop falling and rebound.
It can be seen that the performance of the market after triggering the fuse mechanism still depends on whether the confidence of the market is restored. If you can't judge the change of the situation, wait for the trend to stabilize before you get involved in the market!