Circuit breakers were introduced in the United States after the 1987 crash to pause trading during extreme declines.
The October 19, 1987, collapse revealed how rapidly selling could spread across linked markets. In response, the Brady Commission recommended coordinated safeguards. U.S. exchanges subsequently adopted trading halts tied to large movements in broad market indexes.
Modern U.S. market-wide circuit breakers use S&P 500 thresholds. A 7 percent or 13 percent fall can trigger a Level 1 or Level 2 halt during regular trading, while a 20 percent fall closes the market for the day. These mechanisms do not prevent losses, but they provide time for information to spread and investors to reassess orders.