Circuit Breaker

Circuit breakers are designed to prevent panic selling and give investors time to absorb information and reconsider their decisions during extreme market movements.

Market-wide circuit breakers pause trading on an entire exchange if a major index falls by certain percentages in a single day. For example, under rules used in some markets, trading might pause for 15 minutes if the index falls 7%, pause again at 13% and close for the rest of the day at 20%. The exact thresholds and durations vary between exchanges.

Single-stock circuit breakers, sometimes called trading halts or volatility pauses, stop trading in an individual share if its price moves too far, too fast, often within a set band around a reference price.

Circuit breakers were widely introduced after the 1987 stock market crash and have been refined since, including after sudden "flash crashes" caused by automated trading.

Supporters argue that they calm markets and prevent disorderly trading. Critics suggest they can sometimes increase anxiety, as traders rush to sell before a halt is triggered. Either way, they are a standard feature of modern stock exchanges.