The trading safeguard introduced in the United States after the 1987 crash to pause markets during extreme declines was circuit breakers.
Circuit breakers are automatic trading halts or restrictions triggered by unusually large market moves. They were developed after Black Monday exposed how quickly computerized and human selling could overwhelm market systems. The goal is to give investors time to assess information and reduce panic-driven order flow.
The New York Stock Exchange introduced its first market-wide circuit breakers in 1988. The original rules were based on point declines in the Dow Jones Industrial Average, while modern U.S. rules use percentage declines in the S&P 500 for market-wide Level 1, Level 2, and Level 3 halts.
Circuit breakers do not prevent prices from falling after trading resumes, and they are not the same as ordinary single-stock trading halts. They are also distinct from margin calls, which require investors with borrowed money to provide cash or securities.