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Finance GlossaryCircuit Breaker
Circuit Breaker
Definition of Circuit Breaker
A circuit breaker or market curb is a measure that exchanges use to put a stop to all trading activities across an index or entire market. This regulatory measure is put in place to curb panic selling, especially when markets are in free fall.
That’s why circuit breakers are also known as trading curbs and are put in place when an index or market reaches a specific level. These are the current circuit breaker limits on NSE:
That’s why circuit breakers are also known as trading curbs and are put in place when an index or market reaches a specific level. These are the current circuit breaker limits on NSE:
| Circuit Breaker Trigger | Trading Halt Duration |
|---|---|
| 10% | 0-45 minutes |
| 15% | 45 minutes; 1 hour 45 minutes; rest of the day |
| 20% | Rest of the day |
Related Terms
Interest Coverage Ratio
Interest Coverage Ratio (ICR) is used to determine the likelihood of a company’s ability to pay interest on existing outstanding debt. A low ICR typically indicates that a company is less likely to pay interest.
In fact, it indicates that the company may be heading towards bankruptcy. A higher ICR means that a company’s financial health is solid and more than likely to pay interest on existing outstanding debt.
In fact, it indicates that the company may be heading towards bankruptcy. A higher ICR means that a company’s financial health is solid and more than likely to pay interest on existing outstanding debt.
Target Price
The target price refers to the projected price level that analysts expect a stock to reach within a predefined time frame. This estimate is based on financial analysis, market trends, and the performance of the company. The target price is often used as a benchmark by investors as they make decisions related to buying, holding, or selling. However, the actual prices may vary as a result of market fluctuations.
Yield to Maturity (YTM)
Yield to Maturity is the total return an investor can expect if a bond is held until maturity, accounting for interest payments and any gain or loss if purchased at a discount or premium. For example, buying a bond below face value increases its YTM beyond the coupon rate.
Nominee
Nominee is a person appointed by an investor to receive the assets or benefits of an investment in case of the primary investor’s death. Adding a nominee helps ensure the smooth transfer of securities, bank balances, or mutual fund units to the rightful beneficiaries.
Pennant Pattern
A Pennant is a continuation chart pattern used in technical analysis, and is shaped like a small, symmetrical triangle or a flag. It is formed following a sharp, significant move in price (either up or down) and represents a brief consolidation phase where volume is declining. The pennant pattern is characterised by two converging trend lines. Once the consolidation is over, a breakout from the pennant pattern (in the direction of the initial move) is anticipated, which indicates a continuation of the previous trend. Traders look for a large volume to accompany the breakout to confirm the move.
Swap
A swap is a financial agreement between two parties. They exchange cash flows or liabilities, mostly to manage risk. Common examples of swaps include currency swaps or interest rate swaps. For instance, one party may swap a fixed interest payment for a floating one to hedge against changes in interest rates. A swap helps both parties involved manage exposure and optimize financing costs.
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