Shock Absorber

DEFINITION of 'Shock Absorber'

A temporary restriction placed on the trading of index futures because of substantial intraday decreases in the underlying indexes.

BREAKING DOWN 'Shock Absorber'

Shock absorbers are very similar to circuit breakers. However, these restrictions are more specific as they isolate a single index and are enacted at a tighter level. The shock absorbers restrict trading and provide a period of information and pricing absorption for the holders of index futures contracts.

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