Market StructureIntermediate#Risk Management#Exchange
Circuit Breaker
C
Definition
A rule-based trading pause or restriction triggered under a specific venue's market-volatility procedures. It can interrupt trading, but it does not prevent losses, liquidations, manipulation, or a later price move.
Source reviewed
- SEC: Investor Bulletin on market-wide circuit breakers opens in a new tab
Supports: Documents US equity-market circuit-breaker thresholds, timing, halt duration, and the distinction between temporary and day-long halts.
- SEC: Updated market-wide circuit breakers opens in a new tab
Supports: Documents the S&P 500 reference, daily calculation, levels, and scope for US exchange-listed securities.
Concept Diagram
Key Takeaways
1
Circuit breaker rules are venue- and product-specific; there is no universal crypto trigger or halt duration
2
US exchange-listed equity rules use defined S&P 500 levels, which should not be copied to crypto venues
3
A pause can change order, margin, liquidation, and reopening conditions but does not guarantee an orderly price or prevent losses
4
Verify the current official trigger, price source, duration, treatment, authority, and reopening procedure before relying on a rule
Practical Example
A trader sees a venue pause a market. They consult the venue's current official rule to determine whether orders were cancelled or retained, how margin is treated, and how trading restarts. They do not assume a US-equity threshold or that a resumed price will be safer than the halted price.
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