Circuit breakers

Definition

Circuit breakers in the context of securities exchanges are mechanisms designed to temporarily halt trading on an exchange to curb panic-selling and prevent excessive market volatility. They are triggered when prices of securities fall or rise beyond predetermined thresholds within a trading day.

Related terms

Market Volatility: The degree of variation of a trading price series over time as measured by the standard deviation of returns.

Panic Selling: A sudden widespread selling of securities by investors, often driven by fear, leading to sharp declines in security prices.

Securities Exchange: A marketplace where securities such as stocks and bonds are bought and sold