Circuit Breaker

A regulatory mechanism that temporarily halts trading on an exchange when prices fall by a predetermined percentage, designed to prevent panic selling and give participants time to absorb information. U.S. market-wide circuit breakers trigger at 7%, 13%, and 20% declines in the S&P 500. They were created after Black Monday in 1987 and were famously triggered four times in March 2020 during the COVID crash -- events so unusual that traders dubbed them "limit down" days.