Circuit Breaker

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DEFINITION of 'Circuit Breaker'

Refers to any of the measures used by stock exchanges during large sell-offs to avert panic selling. Sometimes called a "collar."

BREAKING DOWN 'Circuit Breaker'

After an index has fallen a certain percentage, the exchange might activate trading halts or restrictions on program trading. For example, if the Dow Jones Industrial Average falls by 10%, the NYSE might halt market trading for one hour. There are other circuit breakers for 20% and 30% falls.

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RELATED FAQS
  1. What does the Dow Jones Industrial Average measure?

    The Dow Jones Industrial Average (DJIA) is the oldest and best-known stock market index. It measures the daily price movements ... Read Full Answer >>
  2. What is the difference between the Dow Jones Industrial Average and the S&P 500

    The Dow Jones Industrial Average (DJIA) and the S&P 500 are both widely followed American stock market indexes. The major ... Read Full Answer >>
  3. How many components are listed on the Dow Jones Industrial Average?

    The Dow Jones Industrial Average, or DJIA, is a stock index comprised of 30 different companies traded on the Nasdaq and ... Read Full Answer >>
  4. What caused Black Monday, the stock market crash of 1987?

    The cause of the stock market crash of 1987 was primarily program trading, used by institutions to protect themselves from ... Read Full Answer >>
  5. What caused the stock market crash of 1929 that preceded The Great Depression?

    The stock market crash of 1929 was due to a market that was overbought, overvalued and excessively bullish, rising even as ... Read Full Answer >>
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    Junk bonds were the at heart of the financial crisis of 2007-2008. Toxic assets related to the subprime housing market pushed ... Read Full Answer >>

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