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Glossary Term: CIRCUIT BREAKERS

Definition(s) for CIRCUIT BREAKERS:


1. ) Measures used by some major stock and commodities exchanges to restrict trading temporarily when markets rise or fall too far, too fast. For example the New York Stock Exchange (NYSE) employs a circuit breaker that will halt trading if the Dow Jones Industrial Average declines by more than 10 0n one day.

2. ) An imposed pause in trading that permits buyers and sellers time to assimilate incoming information and make investment choices. Circuit breakers promote investor confidence by giving investors time to make informed choices during periods of high market volatility.Related Information

3. ) It measures instituted by the major stock and commodities exchanges to halt trading temporarily in stocks and stock index futures when the market has fallen by a specified amount in a specified period. Circuit breakers were instituted after Black Monday in 1987 and modified following another sharp market drop in October 1989. Their purpose is to prevent a market free fall by permitting a rebalancing of buy and sell orders.



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