Trading safeguards on our markets

Euronext’s general philosophy is not to halt trading except in extreme circumstances. To achieve this, we do not rely on circuit-breakers alone, but on a full set of trading safeguards. Over the years Euronext has developed a complete set of mechanisms that go beyond market protection and are designed to prevent situations of disorderly markets and detect unusual events. All our market protection mechanisms are discussed and validated with our regulators, ensuring that we are constantly improving the safety net across all our regulated markets. 

Prevention

Market protection mechanisms include:

  • the capacity to reject aberrant orders (unusually large in size or in units/price) before they enter the market;
  • the capacity to halt instruments subject to single orders that might disrupt the market;
  • the capacity to prevent significant price variations (dynamic or static collars*).

Detection 

A comprehensive set of algorithm-powered alerts that are triggered by our monitoring systems and handled in near real-time by analysts from our Cash Market team ensures fair and orderly markets as well as investigation and resolution where needed.

Reservation periods

Dynamic and static collars constitute the first and second layers of Euronext’s circuit-breaker mechanism, respectively. The reference price is used to calculate both collars. The reference price changes throughout the trading day after each trade, with the last traded price becoming the new reference.

Reservation periods limit the impact of any unexpected sharp price movements whilst giving the market ample time to review orders and investment decisions before trading resumes. The below table indicates threshold for these collars:

 

PRODUCT

DYNAMIC COLLARS*

STATIC COLLARS*

Thresholds

All AEX, BEL 20, CAC 40, ISEQ 20 and PSI 20 constituents

+/- 3%

+/- 8%

Thresholds

Other Equities

+/- 5%

+/- 10%

Minimum Trading Halt duration

All securities that are traded on a continuous basis

3 minutes

3 minutes

Minimum Trading Halt duration: consecutive trading halt in same direction

All AEX, BEL 20, CAC 40, ISEQ 20 and PSI 20 constituents

3 minutes

10 minutes

*Dynamic collars are based on the dynamic reference price, which is taken from the last traded price and is amended with each new trade throughout the trading day. This safeguard threshold automatically halts trading on a stock if its price reaches +/−5% price variation (or +/-3% if the stock is part of a flagship index) on the dynamic collar reference price.

Static collars are based on the static reference price, which is taken from the opening price of the security if it has traded on the same day, or the last reference price from the previous trading day. This safeguard threshold automatically halts trading on a stock if its price reaches +/−10% price variation (or +/-8% if the stock is part of a flagship index) on the static collar reference price.