Analysis Of The Impact Of Circuit Breaker Mechanism On Stock Market Stability

With the continuous expansion of the opening up of China’s financial market,the existing regulatory system and the regulatory system are facing the problem of reform.In the face of large fluctuations in financial markets,regulators have implemented a series of policies,such as a limit system and a circuit breaker mechanism.In order to promote the stable development of the market and curb the overreaction of the stock market in 2016,China introduced a circuit breaker mechanism based on the Shanghai and Shenzhen Stock Exchange 300 index on January 4,2016.Because such a market protection system directly affects the operation of the market mechanism,the circuit breaker mechanism continues to trigger the circuit breaker threshold shortly after its implementation,and the market transaction is difficult to operate normally,and it was urgently stopped by the regulator after only four days of implementation,causing controversy over the circuit breaker mechanism from all parties in the society.Regarding the research on circuit breaker mechanism,scholars have always debated its advantages and disadvantages,this paper sorts out the views expressed by domestic and foreign scholars on circuit breaker mechanism,compares and analyzes the development status and policy characteristics of circuit breaker mechanism in various countries in the world,and explores the impact of circuit breaker mechanism on market stability.Based on the intraday high-frequency trading data of stocks in the Shanghai and Shenzhen A-share markets,this paper adopts a linear regression measurement method to explore the influence of circuit breaker mechanism on market stability.The trading day that implemented the circuit breaker system and triggered the market circuit breaker was selected as the experimental group,and the trading day that did not adopt the circuit breaker system but the index fell by 7% was also used as the control group,and the effect of the circuit breaker mechanism on the market was tested according to the empirical results.This paper also analyzes the possible impact of circuit breaker mechanism and other policy systems,and finally concludes that after the implementation of circuit breaker mechanism,when the stock price approaches the trigger point of the circuit breaker threshold,the speed of approaching the trigger point accelerates,and the possibility of triggering the circuit breaker also increases,that is,the circuit breaker mechanism aggravates market volatility and increases the risk of stock price fluctuation.In addition,the circuit breaker mechanism and the price limit system have formed a superposition on the magnetic effect on the stock price,which further aggravates the risk of stock market volatility;In the process of falling stock price index,panic will spread from Shanghai and Shenzhen Stock Exchange 300 constituents to non-Shanghai and Shenzhen Stock Exchange 300 constituents,causing the entire market to fall and triggering circuit breakers;The margin trading system and stock index futures also have an impact on the stability of the stock market,and play a positive role in suppressing the circuit breaker mechanism on the volatility of the stock market.From the perspective of the development process of China’s securities market,market manipulation,excessive speculation,insider trading are always problems,so from the perspective of the needs of China’s securities market risk control system,the circuit breaker mechanism has a positive impact in maintaining market stability,reducing irrational speculation,and promoting the transmission of information in the market,so the circuit breaker mechanism is needed to play a stable market role.According to the specific provisions of the circuit breaker mechanism that China has implemented,this paper analyzes the reasons why the circuit breaker mechanism has not been successfully implemented in China,and finds out the shortcomings in China by comparing the circuit breaker mechanism system of other countries.At the same time,this paper has certain reference and guiding significance for the re-implementation of the circuit breaker mechanism in China,provides theoretical supplements for the role of the circuit breaker mechanism,puts forward corresponding policy suggestions to establish more perfect stock market trading price restriction measures,effectively protect the interests of investors,cultivate mature investors to better improve the investor structure,strengthen the sense of social responsibility of institutional investors and the mission of maintaining market stability,improve the efficiency of asset allocation in the financial market,and promote the high-quality development of China’s economy.