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."

INVESTOPEDIA EXPLAINS '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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