Black Monday led the United States to create modern stock-market circuit breakers. After the 19 October 1987 collapse, regulators sought mechanisms that could temporarily slow trading during extreme price movements and give investors time to assess information.
The Brady Commission reviewed the crash and recommended coordinated protections across futures and stock markets. The New York Stock Exchange introduced trading halts in 1988, and coordinated “collars” were developed to limit disorderly selling. These protections evolved into the market-wide circuit breakers used today.
Circuit breakers do not prevent losses or guarantee a rebound. They pause or restrict trading when specified index movements are reached. Their purpose is to reduce panic, allow orders and information to be processed, and prevent temporary market dislocations from accelerating purely because trading systems are moving too quickly.