Circuit breakers temporarily halt market-wide trading or in individual securities when prices hit pre-defined levels to curb panic-selling on US stock exchanges and excessive volatility – large price swings in either direction – in individual securities.

Market-Wide Circuit Breakers

If the S&P 500 index falls to 7% below its previous close, this is known as a Level 1 decline. A Level 2 decline refers to a drop of 13% and a Level 3 decline refers to a drop of 20%.

Level 1 or 2 circuit breakers will halt market-wide trading for 15 minutes, unless it occurs at or after 15:25 EST (in which case trading is allowed to continue). Level 3 circuit breakers, regardless of the timing it occurs, will halt trading for the remainder of the trading day (09:30 to 16:00 EST).

Limit Up-Limit Down Circuit Breaker (Single Stock Circuit Breaker)

Unlike a market-wide circuit breaker, a single-stock circuit breaker occurs when there is a large, sudden price movement in a stock.

Based on the Limit Up/Limit Down plan (approved by the SEC in April 2019), the acceptable up-or-down trading range is 5% for Tier 1 National Market System (NMS) securities: S&P 500- and Russell 1000- listed stocks, some exchange-traded products; price greater than USD3.00 (p > USD3.00).

For Tier 2 NMS securities, the acceptable up-or-down trading range is 10%. This includes other stocks priced over USD3.00 (p > USD3.00)

Finally, the acceptable up-or-down trading range for other stocks priced greater than or equal to USD0.75 and less than USD3.00 (USD0.75 ≤ p ≤ USD3.00) and lesser of 75% or USD0.15 for other stocks priced less than USD0.75 (p < USD0.75) is 20%.

Additionally, these price bands double during the opening and closing periods of the trading day. If trading outside of these bands persists for 15 seconds, trading is halted for 5 minutes. The reference price is calculated using the average price over the previous 5 minutes. The maximum allowed pause is 10 minutes.