Trading · Rules and regulations
Market-wide circuit breakers: the 7%, 13% and 20% halt rules
How US stock market circuit breakers work: the three S&P 500 trigger levels, the 3:25 p.m. rule, the four March 2020 halts, and the history back to 1987.
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A market-wide circuit breaker stops trading in every US stock and stock option at the same time when the S&P 500 falls far enough in a single day. It is the market's emergency brake. The idea is that a short, coordinated pause gives investors time to absorb what is happening, lets firms check their systems and margin, and keeps a panic from turning into disorderly prices across thousands of securities at once.
Circuit breakers are rare. Under the current rules they had never fired until March 2020, when they fired four times in eight trading days. This guide explains the three trigger levels, the timing rules, what happened in March 2020, how the system evolved from the crash of October 1987, and how market-wide halts differ from the single-stock pauses that happen every day.
The three levels
The circuit breakers are measured on the S&P 500 index, a broad gauge of large US companies. Each morning the trigger levels are calculated from the previous day's closing value of the index. During the day, if the index falls to one of those levels, the listing exchanges halt trading across all US equity and equity options markets.
| Level | S&P 500 decline from prior close | Before 3:25 p.m. ET | At or after 3:25 p.m. ET |
|---|---|---|---|
| Level 1 | 7% | 15-minute market-wide halt | No halt; trading continues |
| Level 2 | 13% | 15-minute market-wide halt | No halt; trading continues |
| Level 3 | 20% | Trading halts for the rest of the day | Trading halts for the rest of the day |
Why 3:25 p.m.?
A 15-minute halt that started after 3:25 p.m. would end in the last 20 minutes of the session, just as closing auctions are assembling the official closing prices that index funds, mutual funds and derivatives depend on. The rule keeps the closing process intact for Levels 1 and 2. Only a 20% decline, a genuine crash, is allowed to end the day.
Why only once a day?
If Level 1 fired, trading reopened, and the index bounced around the 7% line, a repeating rule could halt the market again and again. Allowing each level only once means the next brake is the next level down.
March 2020: the four halts
In late February 2020, as COVID-19 spread, US stocks began falling sharply. In March, the circuit breakers were triggered four times in eight trading days. The details below come from the industry working group's report on the events.
- Monday, March 9. S&P 500 futures had hit their overnight limit-down. The index crossed the 7% threshold at 9:34:13 a.m., minutes after the open. Reopening auctions began at 9:49:13 a.m. The index recovered to about 5.5% down, then closed 7.6% lower.
- Thursday, March 12. After global health authorities declared a pandemic, the index crossed 7% at 9:35:44 a.m. It reopened, recovered somewhat, then fell again to close down 9.5%.
- Monday, March 16. Selling was so heavy that the threshold was crossed at 9:30:01 a.m., one second into the session, before most S&P 500 stocks had even completed their opening auctions. The day ended down 12%.
- Wednesday, March 18. The market rose at first, began dropping around 10:45 a.m., and crossed 7% at 12:56:17 p.m., the only midday trigger. It closed down 5.2% after rallying into the close.
Every halt lasted exactly 15 minutes and reopened through auctions as designed. Level 2 was never reached. The working group concluded that the mechanism worked, while noting that three of the four halts fired within the first five minutes of trading, when many stocks had not yet opened, which complicates both the index calculation and the reopening.
How the rules evolved
October 19, 1987. The Dow Jones Industrial Average fell 22.6% in a single day, still the largest one-day percentage decline in its history. The presidential task force that studied the crash, known as the Brady Commission, recommended coordinated circuit breakers designed in advance rather than the ad hoc breakdowns that occurred.
1988. The SEC approved the first market-wide circuit breakers. They were based on points of the Dow: a 250-point fall halted trading for one hour, and a 400-point fall for two hours. When adopted, those points represented about 12% and 19% of the index.
1996–1997. The halt lengths were cut to 30 and 60 minutes, and in 1997 the triggers were raised to 350 and 550 points as the Dow rose.
October 27, 1997. The breakers fired for the first time. The Dow fell 350 points (4.54%) by 2:36 p.m., halting trading for 30 minutes. After the reopening it fell to the 550-point level at 3:30 p.m., closing the market for the day. The SEC staff later concluded the thresholds had been far too low: a 4.5% decline did not justify halting the whole market.
1998. The triggers switched to percentages of the Dow, 10%, 20% and 30%, recalculated each quarter, with halt lengths that depended on the time of day.
After May 6, 2010. The "Flash Crash" did not reach the 10% trigger, even though the Dow fell about 9% within minutes and many individual stocks traded at absurd prices. In response, regulators redesigned the system. The current rules, approved in 2012, measure the S&P 500 instead of the Dow, recalculate the triggers daily, use the 7%, 13% and 20% levels, shorten halts to 15 minutes, and allow halts until 3:25 p.m. The same reforms created the single-stock Limit Up-Limit Down bands. The rules began as a pilot and were later made permanent, and 2026 exchange filings restate the same levels.
Market-wide halts versus single-stock pauses
| Feature | Market-wide circuit breaker | LULD trading pause |
|---|---|---|
| What triggers it | S&P 500 down 7%, 13% or 20% from prior close | One stock reaches its price band for 15 seconds |
| What stops | All US stocks and equity options | One stock (and its options) |
| How long | 15 minutes, or rest of day at Level 3 | 5 minutes, extendable |
| How often | Four times under current rules (March 2020) | Routinely, mostly in volatile small stocks |
| Time limits | Levels 1–2 not after 3:25 p.m. | Regular session, 9:30 a.m.–4:00 p.m. |
Futures markets have their own limits. Before the March 9, 12 and 16, 2020 openings, E-mini S&P 500 futures had already reached their limit-down state (a 5% decline) in overnight trading on the CME, which is why the cash market opened so close to the 7% line on those days.
Pitfalls and misconceptions
- "A circuit breaker means the market will bounce." It does not. In March 2020 the halts were followed by further declines before the eventual recovery.
- "Trading is halted after a 7% fall at any time." Not after 3:25 p.m. A late-day 7% or 13% decline does not halt anything.
- "It is measured on the Dow." Not since the 2012 reforms. Headlines often quote the Dow, but the trigger is the S&P 500.
- "Orders are cancelled." Generally not. Resting orders usually remain and can execute at the reopening, which may be at a very different price. Check your broker's policy.
- Overnight and futures moves. The circuit breakers apply to the regular session. Large moves can still occur in futures and in extended-hours trading, where the stock-market levels do not apply.
How Finabase helps
Finabase shows the inputs you need to follow a fast market, though it does not trigger or display halts itself. The indices page tracks the S&P 500, Dow, Nasdaq and other benchmarks with their day change, the market overview shows indexes, sectors and the day's biggest movers in one place, and the SPY chart lets you study past selloffs, including 2020, on daily, weekly or monthly bars. To estimate how close the market is to a trigger, compare the S&P 500's current level with 93%, 87% and 80% of its previous close.
Frequently asked questions
What percentage drop triggers a stock market circuit breaker?
A 7% fall in the S&P 500 from the prior day's close triggers Level 1, 13% triggers Level 2, and 20% triggers Level 3. Levels 1 and 2 halt trading for 15 minutes only if they occur before 3:25 p.m. ET.
How many times have circuit breakers been triggered?
Under the current S&P 500-based rules, four times, all Level 1: March 9, 12, 16 and 18, 2020. Under the older Dow-based rules, the only market-wide halt was on October 27, 1997.
What happens to my orders during a circuit breaker halt?
Trading stops on every venue for 15 minutes. Orders already in the market generally stay there and can execute in the reopening auctions, at prices that may differ sharply from before the halt. Brokers' handling of new and stop orders varies.
Did the stock market close early in 2020?
No. None of the March 2020 declines reached the 20% Level 3 trigger, so each day reopened after a 15-minute halt and traded to the normal 4:00 p.m. close.
Summary
Market-wide circuit breakers pause all US stock and options trading when the S&P 500 falls 7% or 13% before 3:25 p.m., and end the day at 20%. They grew out of the 1987 crash, misfired at too-low thresholds in 1997, and were rebuilt after the 2010 Flash Crash into the daily S&P 500-based system used today. March 2020 tested them four times; each halt worked as designed, and none stopped the decline. They buy time and order, not a floor under prices.