“Circuit breakers” were implemented after 1987’s Black Monday market crash.
Transcript:
As stocks continue to spiral, the S&P 500 is coming closer and closer to triggering what are called “circuit breakers.” A circuit breaker is a type of safety mechanism that forces markets to halt trading if the S&P falls by a certain percentage during the trading day.
If it falls by 7% or 13% during intraday trading, which are considered level 1 and level 2 circuit breakers — trading is halted for 15 minutes. However, if the index drops by 20% or more and triggers a level 3 circuit breaker, trading will be stopped for the remainder of the day.
“Circuit breakers” were originally established in the wake of 1987’s Black Monday crash and were designed to stop panic selling, which would continue to send stocks plummeting. The last time a stoppage was triggered was in March 2020, when trading was halted on four separate days at the start of the COVID-19 pandemic.
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