The Kuala Lumpur Stock Exchange said today it would implement a circuit breaker mechanism from March 25 to enhance market stability and investors confidence.

The circuit breaker - a mechanism to temporarily halt trade when large declines are experienced - was "a broader-based approach in addressing excessive downward movement in the stockmarket," it said in a statement.

The stock exchange said it has tested the system over a five-month period and consulted industry players to determine their readiness.

If the key composite index falls by 10-20 percent from the previous day's close, trading will be halted for an hour if the circuit breaker is triggered before 11.15 am or 3.45 pm, it said.

Trade will be halted for the rest of the trading session if the circuit breaker is halted after these two times.

Two trading sessions

But if the composite index falls more than 20 percent, trading will be halted for the rest of the day, it added.

The Malaysian stock market trades in two sessions from 9:00 am to 12.30 pm and from 2.30-5.00 pm.

The circuit breaker will also apply to equity-linked derivatives products on the Malaysia Derivatives Exchange.