Banking Khabar / Amid rising debate over the new 15 percent circuit breaker rule set to take effect from Monday, the issue of how price limits are applied in international capital markets has also come into focus.
In Nepal, where the limit has so far been 10 percent, increasing it to 15 percent has drawn mixed reactions. Some view it as adding risk, while others see it as improving market flexibility. Globally, circuit breakers are mainly used to control extreme volatility and provide investors with a cooling-off period.
In India, both the Bombay Stock Exchange and National Stock Exchange of India use price bands of 2 percent, 5 percent, 10 percent, and 20 percent depending on a company’s liquidity, risk level, and market segment. Smaller and less-traded companies usually have tighter limits, while large and highly liquid stocks are allowed wider movement.
In the United States, the New York Stock Exchange and NASDAQ follow a “Limit Up–Limit Down (LULD)” system, where trading is halted or restricted if prices move beyond dynamic thresholds based on stock price levels and time of day. This system can trigger pauses around 5, 10, or 20 percent moves to prevent sudden volatility.
China’s Shanghai Stock Exchange and Shenzhen Stock Exchange generally impose a daily 10 percent limit for most stocks, while specially designated “ST” stocks are restricted to 5 percent. Japan’s Tokyo Stock Exchange applies different circuit ranges depending on price levels, using a combination of tick sizes and price limits to control volatility.
These examples show that global markets usually do not follow a single uniform limit; instead, they adjust rules based on a company’s characteristics, liquidity, and risk profile. Against this backdrop, Nepal’s decision to apply a uniform 15 percent circuit limit has triggered debate over its suitability.
Supporters argue that the higher limit will allow smoother price discovery, reduce frequent trading interruptions, and improve liquidity in the long run. However, critics warn that it could expose small and inexperienced investors to sharper intraday volatility and increase the risk of market manipulation.
The Nepal Stock Exchange Limited and the Securities Board of Nepal have defended the move, saying it will make the market more efficient, competitive, and attractive by reducing unnecessary trading restrictions.
The actual impact of the new rule, which is set to be implemented from Baisakh 7 (Monday), will depend on market behavior, investor response, and regulatory oversight in the coming days.
