Circuit breakers were the emergency market rules introduced in the United States after the 1987 stock-market crash.
Circuit breakers temporarily halt or restrict trading when prices fall by specified amounts. Their purpose is to give investors time to absorb information, reduce panic-driven order imbalances, and allow exchanges and financial firms to check that trading systems are functioning correctly.
The October 1987 crash demonstrated how computerized trading, portfolio insurance, and globally connected markets could amplify selling. Afterward, U.S. regulators and exchanges developed coordinated trading halts and price limits.
Circuit breakers do not prevent losses or guarantee a market recovery. They are pauses in trading designed to slow a disorderly decline. Modern U.S. rules use percentage thresholds for broad stock indexes, while individual securities can also receive temporary trading pauses.