Glossary · Defined term
Circuit breaker
A circuit breaker is an automatic market-wide trading pause triggered when the S&P 500 drops 7%, 13%, or 20% in a session.
Last updated Oct 2, 2026
What it means
A circuit breaker is an automatic, market-wide trading pause triggered when the S&P 500 falls sharply during the session. In the United States, a 7% decline pauses trading for 15 minutes, a 13% decline pauses it for another 15 minutes, and a 20% decline halts trading for the rest of the day. The rules are set jointly by the major exchanges and apply across all U.S. equity markets.
The purpose is to give investors a cooling-off period during panics. A sudden crash can be driven as much by forced selling and fear as by fundamentals, and a pause lets market participants digest news, check their positions, and enter calmer orders when trading resumes. Circuit breakers were introduced after the 1987 crash and were most recently overhauled in their current form in the years that followed.
Circuit breakers are distinct from trading halts, which pause a single stock rather than the whole market. They are rare: the market-wide triggers have only been hit a handful of times in history, most recently during the sharp selloffs of March 2020.
An example
For illustration, the S&P 500 falls 7% from the prior close by mid-morning. All U.S. stock trading pauses for 15 minutes before resuming, giving investors a moment to reassess instead of selling into a free fall.