Circuit breaker
A market mechanism that temporarily pauses trading or shifts to an auction after an unusually fast move.
Plain languagePractical exampleConnected reading
01
What is it?
A market mechanism that temporarily pauses trading or shifts to an auction after an unusually fast move.
02
Why does it matter?
It gives price discovery time during stress but does not remove price risk.
03
How should it be read?
Check the trigger, pause length, reopening method and exchange rule.
04
Common mistake
Treating a circuit breaker as an automatic loss guarantee.
A simple example
After a single-stock pause, trading can reopen at a materially different equilibrium price.