Analysis of Circuit Breakers Using Artificial Stock Market

In various stock markets, there is a system called “circuit breakers” that interrupts dealing of stocks for a certain period when stock price changes greatly. In this paper, we consider the influence of the circuit breakers on a stock market using an agent-based artificial market simulator called “U-Mart”, by controlling the period of interruption and the criterion to invoke the circuit breakers. From experiments, we found the following: circuit breakers play an important role in the control of price fluctuations and the stabilization of the settlement system, while the circuit breakers reduce the stock trading volume. We also suggest that the period of interruption is important parameter in an institutional design of the circuit breakers, since the stock trading volume and the volatility are sensitive to the period.