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Note: Unless otherwise specified, currency amounts described in this article are in U.S. dollars, and government references are to the U.S. government.

Market Volatility, Trading Halts, and Circuit Breakers

What is a circuit breaker?

It’s a market mechanism designed to reduce panic sell-offs and encourage orderly trading.

How does it work?

In the event of a significant decline in the S&P 500 from the previous day’s closing price, during the regular trading session (9:30 a.m.–4:00 p.m. ET) trading on equities and options halts for 15 minutes or for the rest of the trading day, depending on the severity of the drop and the time at which it occurs.

What are the three levels at which circuit breakers are triggered?

  • Level 1: 7% decline before 3:25 p.m. ET, trading halts for 15 minutes. If it occurs after that time, trading does not halt.
  • Level 2: 13% decline before 3:25 p.m. ET, trading halts for 15 minutes. If it occurs after that time, trading does not halt.
  • Level 3: 20% decline at any time of day, trading halts for the remainder of the day.

A Level 1 or Level 2 halt can only occur once per trading day—so, if trading is halted once due to a 7% decline, prices must fall 13% before a second halt will be implemented.

What happens to my investments if trading halts?

Nothing happens to your positions. They just can't be bought or sold until trading reopens again.

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