Which 1987 crash-prevention mechanism temporarily stops trading after sharp market declines?

A circuit breaker is a crash-prevention mechanism that temporarily stops trading after a sharp market decline.

Circuit breakers were introduced in the United States after the Black Monday crash of 19 October 1987. The Dow Jones Industrial Average fell 22.6% that day, and regulators wanted a way to interrupt automatic selling and give investors time to absorb new information.

Modern U.S. market-wide circuit breakers use percentage thresholds based on the S&P 500’s previous closing value. A Level 1 decline pauses trading for 15 minutes when reached before 3:25 p.m.; a Level 2 decline uses a higher threshold and the same pause. A Level 3 decline stops trading for the rest of the session. The thresholds can change under regulatory rules.

A circuit breaker is not the same as a margin call. A margin call demands additional collateral from an investor whose leveraged position has lost value, while a circuit breaker affects market trading more broadly.