Trading curbs were introduced in the United States after the 1987 stock-market crash.
The crash exposed how rapid selling could overwhelm exchanges and create uncertainty about orders and prices. In response, U.S. regulators and exchanges developed circuit breakers, also called trading curbs, to pause trading after unusually large market movements. The goal was to give investors time to assess information and reduce panic-driven feedback loops.
The original rules were tied to point declines in the Dow Jones Industrial Average. Later reforms changed the system so that market-wide halts use percentage thresholds and apply to major U.S. equity markets. Separate rules can also pause trading in an individual security that moves sharply.
Trading curbs do not prevent losses or guarantee a recovery. They are temporary pauses intended to improve orderly price discovery. They are sometimes confused with exchange-wide closures, which are broader administrative decisions rather than automatic responses to specified market movements.