Circuit Breaker
Market Microstructure glossary · Market Microstructure Fundamentals
Definition
A rule that halts or restricts trading when prices move by more than a specified amount, designed to prevent panic and allow information dissemination.
Circuit Breaker in plain English
Think of a circuit breaker like the automatic switch in your house that cuts the power when too much current surges through, so the wiring doesn't catch fire. In markets, it's a rule that pauses or slows trading when a price crashes (or spikes) too far, too fast. The idea is that a big sudden move might be panic — everyone selling because everyone else is selling — so a short timeout gives people a chance to breathe, read the real news, and figure out what a fair price actually is before trading restarts.
Learn these first
Practice Circuit Breaker
Related Market Microstructure terms
Market Microstructure practice questions · Market Microstructure flashcards · Market Microstructure study guide