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Is there any reason to not just have limits on how much a market can move every day by default?

• kasey_junk 5y ago
  Most exchanges have circuit breakers. LME is old fashioned in lots of ways and being late to circuit breakers is one way. They’ll have them going forward.
• deleted 5y ago
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• deleted 5y ago
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• dragontamer 5y ago
  Sure, and the past week is proof of the folly of daily limits. LME has added limits. So every day, the nickel market opens, drops 8%, and then closes immediately. No one gets to trade, because everyone knows the price of Nickel hasn't reached its "logical" value yet. So these price limits are a de-facto long-term close of the market until the dollar value matches what people want. So in effect, you've closed the market for days (weeks?) since no trading activity takes place to "correct" the price shock. ---------- I mean, its a terrible situation for the nickel market, but I don't think hard price limits like this are a good idea either. After closing the market for a week (presumably long enough to fix whatever political-glitch was going on), it would have been better to just let the price float to whatever it was, instead of this "lurch 8%, close the market" kind of situation.