Glossary
Circuit breaker
An exchange-wide trading halt triggered when the S&P 500 falls 7%, 13% or 20% in a day, giving markets time to pause.
On this page
A circuit breaker is a rule that stops trading across the entire US stock market when prices fall too far, too fast. The market-wide version is triggered by declines in the S&P 500 measured against the prior day's close. It exists to give investors time to absorb information and to keep a panic from feeding on itself, a design that grew out of reviews of the October 1987 crash.
How it works
| Level | S&P 500 decline | Before 3:25 p.m. ET | At or after 3:25 p.m. ET |
|---|---|---|---|
| Level 1 | 7% | 15-minute halt | No halt |
| Level 2 | 13% | 15-minute halt | No halt |
| Level 3 | 20% | Trading closes for the day | Trading closes for the day |
Each of Levels 1 and 2 can trigger only once per day. The rules apply during regular trading hours and are unchanged as of 2026.
In practice, Level 1 halts occurred four times in March 2020, on the 9th, 12th, 16th and 18th, as COVID-19 fears hit markets. Trading resumed after 15 minutes each time, as designed.
Related mechanisms
The term is also used loosely for other safeguards. Individual stocks are governed by Limit Up-Limit Down, which pauses trading in a single security that moves outside a price band, and by exchange news halts. Regulation SHO's short-sale price test, triggered when a stock falls 10% from the prior close, is sometimes called a short-sale circuit breaker. Futures exchanges have their own price limits, including overnight.