Black Monday, the October 19, 1987, market crash, prompted U.S. regulators to develop modern trading circuit breakers.
The Dow Jones Industrial Average fell 508 points, or 22.6%, in one session. The speed and scale of the decline exposed weaknesses in market infrastructure, including the difficulty of processing enormous volumes of orders and the possibility that automated strategies could reinforce selling. Markets were increasingly interconnected through computerized trading and portfolio insurance.
After the crash, the U.S. Securities and Exchange Commission examined market structure and recommended coordinated procedures for extraordinary volatility. Exchanges subsequently introduced rules that could temporarily halt trading when prices moved beyond specified thresholds. These mechanisms are intended to give investors and systems time to absorb information rather than eliminate ordinary market risk.
Circuit breakers should not be confused with the daily price limits used in some markets or with the trading halts associated with the 2010 flash crash. Their modern U.S. framework traces directly to lessons from the 1987 collapse.