Do circuit filters calm down passions?
S. Murlidharan Circuit filters were introduced in 1987 for the first time in the US following a precipitous market crash. In India, the Securities and Exchange Board of India (SEBI) mandated both market and individual scrip circuit filters in 2000. The system is in vogue both in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), which between themselves account for practically the entire stock market volumes in the country. Cooling exercise The concept of circuit filter in the context of stock markets is simple — cooling down passions. If Sensex or Nifty, for example, moves up or down beyond the specified limits in terms of percentage, trading comes to a halt for the specified duration. Ditto for individual scrips. Ironically, individual circuit filters do not halt trading in shares forming part of the indices — Sensex as well as Nifty. Perhaps, SEBI wants the bellwether shares to be freely traded untrammelled by circuit breakers. One doesn’t know why the same logic
