Divisional Head, Capital Markets, Nigerian Exchange Limited (NGX), Mr Jude Chiemeka says the company is committed to positioning the Nigerian capital market as a global investment destination.
Mr Chiemeka stated this during his opening remarks at the NGX Index Circuit Breaker webinar, themed, “Role and Impact of Index Circuit Breakers in the Capital Market.”
In his remarks, he noted, “As an agile exchange, NGX is committed to enhancing the competitiveness of the Nigerian capital market as a global investment destination. The webinar, which is geared towards educating market operators, investors and other stakeholders about the design and benefits of Index Circuit Breakers would also examine the unprecedented event of November 12th, 2020 when the NGX Index Circuit Breaker was triggered for the first time since its introduction in 2016”.
He also shared the benefits of circuit breakers to daily trading operations, “They play a significant role in capital markets operations by helping to curb panic-selling on stock exchanges, halt trading in event of adverse volatility when prices of securities rapidly move outside of pre-determined bounds and instil investor confidence in the market”, he added.
Financial Economists World Federation of Exchanges (WFE), Kaitao Lin, in his presentation said “Circuit breakers can achieve an improvement in market quality, such as a reduction in volatility, an increase in liquidity, or a more efficient price discovery process. However, circuit breakers often do not have any significant impact on prices as they do not stop a fall in prices”.
Office of International Affairs, Commodity Futures Trading Commission USA, Kelvin Piccoli, said questions about the circuit breaker and market quality can be addressed using a theoretical market approach and econometrics event studies.
According to him, the theoretical market microstructure model examines how information shocks affect liquidity, price formation or agent behaviour in the presence of circuit breakers while the econometric event studies test the impact of circuit breakers on trading patterns and market variables.
Additionally, William Speth, Former Vice President, of Research CBOE Holdings Inc. Chicago while making presentations during the webinar, showed data investigating the four market-wide trading halts in the USA during March 2020 and provided model recommendations to NGX.
