What market-control mechanism did U.S. exchanges introduce after the 1987 stock-market crash?

U.S. exchanges introduced circuit breakers after the 1987 stock-market crash. These rules temporarily halt or restrict trading when prices move beyond specified thresholds in a single session.

On October 19, 1987, the Dow Jones Industrial Average fell 22.6%, its largest one-day percentage decline. The crash exposed weaknesses in market structure, including the interaction between computerized trading, futures markets, and a rapidly falling cash equity market. Regulators subsequently sought a way to slow panic-driven selling and give investors time to assess new information.

The first U.S. circuit breakers took effect in 1988. Their design and trigger levels have changed over time, and modern U.S. rules use percentage declines in the S&P 500 to create market-wide Level 1, Level 2, and Level 3 halts. Circuit breakers do not prevent losses or guarantee a recovery; they are pauses intended to reduce disorderly trading. They are sometimes confused with individual-stock limit-up and limit-down rules, which apply to particular securities rather than the whole market.