Index-based Market-wide Circuit Breakers:Since the index showed a downward movement of about 20%, the nse was closed and rightly so. But surprisingly, the exchange was re-opened in few minutes, citing reasons of erroneous trades by one of the broker for about 650cr.
The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%.In case of a 20% movement of the index, trading shall be halted for the remainder of the day.
From the following table you can check out the lows of index and other nifty stocks below: There were many stocks in the nifty down as much as 15-20% , all were actual trades done during normal market hours and no freak trades which would happen in small-cap or penny stocks.
Such a crash had happened in nifty futures a few months ago, for which the reason attributed was algo trading, but this one was a manual execution of orders. Considering market at these higher levels, big selling could be anticipated, if not such a big one. Traders should be aware of such events and get themselves protected using proper risk management systems. Had the markets been frozen, it would have been a black swan event and if you wonder what's this black swan is all about, you can read about it here at Black Swan Theory.
