Black Monday, the 1987 market crash, prompted the creation of circuit breakers on US stock exchanges.
After the Dow's 22.6% fall on October 19, 1987, regulators and exchanges sought ways to interrupt a rapidly accelerating sell-off. Circuit breakers were introduced in the United States in 1988. They temporarily halt or slow trading when broad market indexes move by specified amounts.
The original rules were designed for sharp intraday declines and were revised many times. Modern US equity-market rules use S&P 500 percentage thresholds, including Level 1, Level 2, and Level 3 market-wide halts. Individual stocks can also be subject to limit-up-limit-down protections.
Circuit breakers do not prevent bad news or eliminate risk. Their purpose is to give investors time to assess information and reduce the chance that automated orders will create an uncontrolled feedback loop. The 2010 Flash Crash and the March 2020 turmoil later tested and refined these safeguards.