VOLATILITY CONTROL MECHANISM (VCM)

VOLATILITY CONTROL MECHANISM (VCM) is designed to safeguard market integrity from extreme price volatility arising from automated trading (“Flash Crash”, bad algorithms, etc.). It also serves to alert the market with a temporary cooling-off period for the participants to reassess their strategies and positions and make investment decisions. It is not a trading halt, does not intend to limit the ups and downs of prices due to fundamental events, and it also does not work the same way as the daily price limit model which sets a specific daily price range for derivatives trading as seen in some markets.

Special care has been taken in VCM design to minimise market interruption. For example, it applies to individual instrument rather than the entire market, it is based on a dynamic rather than a static reference price, the triggering level of ±5% is set up such that it would not be triggered too often, VCM is not applicable in certain periods (the first 15 minutes of the morning and afternoon trading session and the last 20 minutes of the afternoon trading session) and to certain instruments.

For more information, please click here>>>