Circuit breakers describe the automatic trading halts introduced in the United States after the 1987 stock-market crash.
Regulators created these mechanisms to pause trading during exceptionally rapid market declines. The goal was to give investors time to assess information, reduce disorderly selling, and allow exchanges and market participants to manage extreme volatility. The first U.S. circuit-breaker system was introduced after the Presidential Working Group examined the crash.
Modern U.S. rules include market-wide halts based on percentage declines in the S&P 500, along with price limits for individual securities. The exact thresholds and procedures have changed over time, so “circuit breakers” is the stable general term rather than a single permanent numerical rule.
Circuit breakers do not prevent losses or guarantee a recovery. They temporarily interrupt trading. They are also different from margin calls, which require an investor to provide additional funds when borrowed positions lose value.