Following US and South Korea, Will Taiwan Introduce Circuit Breakers? Exchange Says Not Considering for Now, Existing Mechanisms Sufficient for Market Stability

The Taiwan Stock Exchange announced today (3rd) that starting August 10, the suspension period for individual stocks will be shortened to 5 days (7 days for those subject to day-trading penalties), with trading matching adjusted to occur once every 2 minutes. Amid market speculation over whether Taiwan will follow the US and South Korean markets in adopting a 'circuit breaker mechanism,' the exchange clearly stated it is not currently considering such a move. The primary reason cited is that Taiwan's existing 10% daily price fluctuation limit and intraday price stabilization measures are already sufficient to provide cooling effects and maintain market order.

With global stock markets experiencing heightened volatility, there has been growing curiosity about whether Taiwan will adopt circuit breakers similar to those in the US or South Korea. Deputy General Manager Du Hui-juan of the Taiwan Stock Exchange explained that the US market has no price limits, while South Korea's limit is as high as 30%, necessitating circuit breakers. In contrast, Taiwan's 10% price limit already provides a foundational safeguard against extreme volatility.

Moreover, Taiwan's current 'Intraday Price Stabilization Mechanism' automatically triggers a 2-minute trading pause when a stock's price deviates more than 3.5% from its reference price, effectively calming market sentiment during sudden spikes.

Regarding recent media reports frequently calculating and publicizing individual stocks' margin maintenance ratios—sparking market panic—the exchange issued a clarification. Market supervision and broker risk management are based on 'overall account maintenance ratios,' not individual stock ratios.

Du Hui-juan emphasized that the maintenance ratio is a tool used by brokers to manage credit risk, calculated by consolidating all margin and short-selling positions across an investor's entire portfolio of listed and OTC securities. Focusing solely on individual stock ratios can be misleading. The exchange urges the media and market participants to rely on responsible, comprehensive information to avoid unnecessary market anxiety.