China’s securities watchdog, the China Securities Regulatory Commission (CSRC), has defended its use of a new circuit breaker on the countries’ volatile stock exchanges on Monday, saying that the mechanism protected investors and calmed markets.
The regulator did say, however, that the circuit breaker needed improvement.
“The circuit breaker is an entirely new mechanism and there’s no experience (with such things) in China. The market needs some time to gradually adapt to the new rules,” the CSRC said, according to Reuters.
The circuit breaker kicks in when the CSI 300 – an index that comprises the biggest stocks on the Shanghai and Shenzhen Composites – declines 5 percent, triggering a 15-minute trading halt. A further drop to 7 percent on the CSI 300 causes trading to halt on all mainland indexes.
Conceived last September after months of market volatility, the circuit breakers were used for the first time on Monday, the first day of trading of the Western new year, causing a knock-on panic in European and U.S. markets that sent the Dow Jones Industrial Average to its worst annual open in eight years.