Black Monday led the U.S. Securities and Exchange Commission to develop circuit breakers for stock trading.
The crash on October 19, 1987, showed how rapidly computer-assisted trading and synchronized selling could overwhelm market liquidity. The Dow Jones Industrial Average lost 22.6% in one day, while other major exchanges also recorded extraordinary declines.
Afterward, the Brady Commission recommended safeguards that could temporarily halt trading during severe market moves. The United States introduced market-wide circuit breakers in 1988, using specified declines in the Dow to pause trading and give investors time to assess information. The system was later revised to use the S&P 500 and percentage-based thresholds.
Circuit breakers do not prevent losses or guarantee that prices will recover. They are designed to slow panic and allow orders and information to be processed. Modern rules can impose shorter pauses or halt trading for the rest of a session, depending on the size and timing of the move.