Price limits in futures markets delay price discovery and increase volatility.
Price limits in futures markets are meant to reduce volatility and improve price discovery, but they don't seem to achieve these goals for agricultural futures contracts. The study shows that price limits do not significantly lower market volatility and actually delay price discovery. The impact of price limits on volatility and price reversals is mainly due to the nature of futures returns, like volatility clustering. Although trading decreases with price limits, traders don't switch to other contracts to avoid circuit breakers.