Circuit breakers


Circuit breakers

Measures instituted by exchanges to stop trading temporarily when the market has fallen by a certain percentage in a specified period. They are intended to prevent a market free fall by permitting buy and sell orders to rebalance.

Circuit Breaker

On an exchange, a measure designed to prevent panic selling by stopping trading after a security or an index has fallen by a certain amount. For example, if the Dow Jones Industrial Average falls 10% in a trading day, the New York Stock Exchange suspends trade for at least one hour. A circuit breaker is intended to allow investors to determine whether a situation is really as bad as it looks. It is sometimes called a collar. See also: Suspended trading.