We have a circuit breaker on the Luno Exchange.
What is a circuit breaker?
A circuit breaker is an emergency-use protective measure to temporarily halt trading on an exchange. It automatically triggers when there are significant price increases or decreases. Activating a circuit breaker allows all market participants to make well-considered decisions, including investors.
Why is it in place?
The aim of a circuit breaker is to protect investors and traders from panic selling, specifically in volatile market conditions.
When does the circuit breaker trigger?
Every 5 minutes, our automated monitoring systems calculate the average volume-weighted trade price, and if there are any price movements that are 10% higher or lower than the average, the circuit breaker is triggered.
Note
The circuit breaker thresholds may be updated depending on market conditions.
What happens when it triggers, and when does it go back to normal?
When the circuit breaker triggers, trading is halted for a period of 5 minutes. During this time, only post-only limit orders are processed. After the 5 minute waiting period, the market is reactivated and trading resumes as normal.
Tip
Not sure what post-only limit orders are? Post-only orders ensure that you won't have to pay a taker fee. An order will only be added to the order book if it does not match with a pre-existing order. If it does, it will be cancelled.
How were the circuit breaker's thresholds determined?
These thresholds were decided through the benchmarking of international exchanges (crypto and non-crypto alike) and it was decided that this would be a middle ground between the volatility of crypto markets as well as protecting investors’ interest during volatile market conditions.
When the circuit breaker triggers, what happens to my existing limit/stop-limit orders?
All matched orders will remain valid. Unmatched and partially-matched orders will remain in the order book when the circuit breaker is triggered.