Circuit breakers were the market-crash safeguard first introduced by the New York Stock Exchange after Black Monday.
Following the October 19, 1987 crash, regulators and exchanges sought ways to prevent a rapid cascade of automated and human selling. The New York Stock Exchange introduced circuit breakers in 1988. These rules could pause trading when the Dow Jones Industrial Average moved by specified amounts.
The purpose was not to prevent prices from falling permanently. Instead, a temporary halt could give investors time to absorb information, check orders, and reduce disorderly trading. The original thresholds were based on point changes in the Dow and were later revised.
Modern U.S. rules use percentage-based market-wide thresholds tied to the S&P 500. A circuit breaker is therefore a trading pause, not a price guarantee or a government rescue. Individual stocks can also have separate volatility controls.