What is 'Fast Market'

A condition that will be officially declared by a stock market exchange when the financial markets are experiencing unusually high levels of volatility, combined with unusually heavy trading. Fast markets occur rarely, but when one does occur, brokers are not held to the same constraints as they are during a regular market.


Inexperienced investors are more likely to get burned in a fast market because of the unique problems that arise under extreme trading conditions. One problem is that quotes can become inaccurate when they can't keep up with the pace of trading. Another problem is that brokers may not be able to fill orders when investors want or expect them to, so their securities may be bought and sold at undesirable price levels that don't provide the return the investor anticipated.

Fast markets are rare and are triggered by highly unusual circumstances. For example, the London Stock Exchange declared a fast market on July 7, 2005, after the city experienced a terrorist attack. Share prices were falling dramatically and trading was exceptionally heavy. 

Fast Markets and Circuit Breakers

Circuit breakers were first introduced after the 1987 stock market crash. Originally, the circuit breaker rule originally halted trading in response to a 550-point drop in the Dow Jones Industrial Average, but in 1998 the trigger points were revised to become percentage drops. While early circuit-breakers used the Dow Jones Industrial Average as a benchmark, it is now the S&P 500 that determines whether trading will stop if a market starts moving too fast.

So-called circuit breakers are designed with the intent to help stem a panic in the event of a fast market and sharp decline in values. Here’s what it would take to trigger market-wide trading halts:

  • 7 percent decline: If the S&P 500 falls 7 percent from the previous session’s close before 3:25 p.m. ET, all stock-market trading halts for 15 minutes.
  • 13 percent decline: After stocks reopen, it would then take a 13 percent decline by the S&P 500 before 3:25 p.m. to trigger a second trading halt, which would also last 15 minutes.
  • 20 percent decline: After a second trading halt, it would take a decline of 20 percent to trigger a so-called Level 3 circuit breaker. Once a 20 percent drop occurs, trading is halted for the remainder of the day. Also note that after 3:25 p.m., stocks only stop trading in the event of a 20 percent drop.
  1. Deal Breaker

    A deal breaker is an issue that is significant enough that one ...
  2. Trading Halt

    A trading halt is a temporary suspension in the trading of a ...
  3. Automatic Execution

    Automatic execution helps traders implement strategies for entering ...
  4. Market Disruption

    A market disruption is a circumstance wherein the regular functions ...
  5. Flash Crash

    A flash crash is an event in electronic markets wherein the withdrawal ...
  6. Trade Trigger

    A trade trigger is any type of event that meets the criteria ...
Related Articles
  1. Investing

    Why China Is Suspending Market Circuit Breakers

    Chinese regulators have announced that beginning on January 8th, circuit breakers used to halt its stock markets will be suspended in order to "smooth" trading operations.
  2. Insights

    Fast Food Versus Fast Casual: Which is More Profitable?

    Between fast food and fine dining lies the rapidly growing fast casual business sector. It's market share is growing. Are profits growing too?
  3. Insights

    Can Mcdonalds Survive Against Fast Casual?

    Can this fast food chain survive against fast casual competitors like Chipotle Mexican Grill?
  4. Insights

    What Monday's Stock Sell-off Had You Searching for

    Monday's historical sell-off had investors on edge and seeking answers on Investopedia to some very interesting questions. Here's a look at what you were searching for as markets bled red.
  5. Trading

    Four Big Risks of Algorithmic High-Frequency Trading

    Algorithmic HFT has a number of risks, and it also can amplify systemic risk because of its propensity to intensify market volatility.
  6. Investing

    Is Best Buy the Next Circuit City? (BBY)

    Circuit City is a former competitor of Best Buy that failed. Will Best Buy meet the same fate?
  7. Insights

    How Algo Trading Is Worsening Stock Market Routs

    Self-driving stock market crash: computerized trading algorithms are running over individual investors.
  8. Trading

    The Perils Of Program Trading

    The increasing use of program trading makes market glitches inevitable - and sometimes disastrous.
  9. Insights

    How Has The Stock Market Changed?

    The past 10 years has seen increased volatility, heralded by the growth of technology.
  1. What caused Black Monday: The stock market crash of 1987?

    Find out about the factors behind the stock market crash of 1987, also known as Black Monday, when the Dow Jones Industrial ... Read Answer >>
  2. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
Trading Center