Monday’s dramatic stock-market drop makes it worth revisiting so-called circuit-breaker levels, the thresholds at which exchanges halt or close market-wide trading due to extreme declines.
Monday’s dramatic stock-market drop makes it worth revisiting so-called circuit-breaker levels, the thresholds at which exchanges halt or close market-wide trading due to extreme declines.
Monday’s dramatic stock-market drop makes it worth revisiting so-called circuit-breaker levels, the thresholds at which exchanges halt or close market-wide trading due to extreme declines. These levels are calculated daily, based on the previous day’s close in the S&P 500.
Circuit breakers came about as a result of Black Monday in October 1987. It takes a lot to hit even the first level, though trading pauses on the individual stock level happen more often.
Level One Breach
A 7% decline in the S&P 500 from the prior day’s close would trigger a so-called level one breach, where trading is halted for 15 minutes.
That level on Monday is 3104.11. (The S&P 500 closed at 3337.75 on Friday).
If that level is reached at or after 3:25 p.m. ET, it would not halt market-wide trading.
In late morning, the index was down 84 points to 3254, or 2.6%, still a long way from sparking a trading curb.
Level Two
The next threshold is 13%. A decline in the S&P 500 by that much would similarly result in a 15-minute halt.
To trigger a level-two circuit breaker Monday, the index would have to drop 434 points to 2903.84. Trading wouldn’t be interrupted if the drop came at or after 3:25 p.m.
Level Three
It takes a 20% drop in the S&P 500 to trigger a level-three circuit breaker. If this happens at any point in the trading day, market-wide trading is halted for the remainder of the day.
To hit level three on Monday, the S&P 500 would need to fall 668 points to 2670.20.
Single Stocks
A different rule covers single stocks, for which the Securities & Exchange Commission has price bands set by tier (Tier One covers members of the S&P 500, Russell 1000 and some exchange-traded products, while Tier Two covers other securities) and by price. Those levels can be found here.
Write to Lisa Beilfuss at lisa.beilfuss@barrons.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Stock Trading Will Be Halted if the Market Falls Too Much. It Isn't Even Close. - Nasdaq
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