Circuit Breaker¶

OVERVIEW¶

A circuit breaker is a coordinated, market-wide trading halt triggered when the S&P 500 declines by a predefined percentage from the prior session's close. The current three-tier framework was adopted by the SEC and the exchanges in February 2013 (Regulation NMS Rule 80B replacement) following the 2010 Flash Crash, which exposed critical weaknesses in the original 1988 system. Halts apply simultaneously to all U.S. equity, options, and equity-futures markets.

Note

Circuit breakers are an execution risk, not a tradable signal. Position sizing and order strategy must account for the possibility of a 15-minute lockout where stops cannot fire and hedges cannot be re-balanced.

HOW IT WORKS¶

Thresholds are calculated against the S&P 500 (SPX) decline from the prior trading day's close. Three levels are defined:

Level	Threshold	Trigger Window	Halt Duration
1	7%	9:30 am – 3:25 pm ET	15 minutes
2	13%	9:30 am – 3:25 pm ET	15 minutes
3	20%	Anytime during regular session	Rest of trading day

Key rules governing triggers:

A Level 1 or Level 2 trigger after 3:25 pm ET does not halt the market — only a Level 3 halt applies in the final 35 minutes.
Each level can trigger only once per day. Once Level 1 fires, the next halt requires a Level 2 threshold (−13%).
During each 15-minute halt, the order book is preserved. Market makers re-quote during a 1-minute auction phase before trading resumes.

Note

Single-stock halts use a separate Limit Up–Limit Down (LULD) framework with 5%/10%/20% bands around a 5-minute volume-weighted reference price, varying by tier and time of day. An SPX-driven Level 1 halt and a single-stock LULD halt are distinct mechanisms.

HISTORICAL REFERENCE¶

The most recent broad-market circuit breakers fired during the COVID crash of March 2020:

Date	Event
March 9, 2020	SPX opened down 7.0% at 9:34 am ET → Level 1 halt (15 min)
March 12, 2020	SPX hit −7% at 9:35 am ET → Level 1 halt
March 16, 2020	SPX gapped down −8% at open, hit −7% within one minute → Level 1 halt
March 18, 2020	SPX dropped −7% at 12:56 pm ET → Level 1 halt

Tip

SPY, the S&P 500 tracking ETF, continued trading in pre-market and overnight futures during each cash-equity halt. Price discovery resets through futures before the resumption auction opens.

Since the 2013 framework was adopted, no Level 2 (−13%) halt has ever fired. Level 1 has triggered nine times total, clustering around extreme macro events such as the COVID crash and the August 2024 yen-carry unwind.

HOW TO USE¶

Tapeboard surfaces circuit breaker context in three practical workflows:

1. Position Sizing for Lockout Risk Size positions to withstand a 15-minute window where stops cannot execute and hedges cannot be re-balanced. Use Tapeboard's risk panel to model worst-case exposure at the resumption auction price.

2. LULD Mean-Reversion Orders Park limit orders inside the LULD bands on single-stock halts. When a halt resolves, the resumption auction frequently closes near the band boundary, creating a defined mean-reversion entry.

3. Macro Tail-Risk Flagging Treat a Level 1 trigger as a macro tail-risk marker. Tapeboard automatically tags Level 1 events on intraday charts and flags any open positions exposed to gap risk at resumption.

Tip

Navigate directly to the circuit breaker status dashboard from any terminal view using the global search bar: type CB Status and press Enter.

LIMITATIONS AND MISCONCEPTIONS¶

Misconception	Reality
Circuit breakers stop selling	They delay it. SPX resumed lower 6 of 9 times after Level 1 triggers since 2013.
Cash halts freeze all price discovery	Pre-market and futures trading continue during cash-equity halts.
Retail orders are protected during a halt	Market orders submitted during a halt execute against the resumption auction price, often far from pre-halt levels.
A single-stock LULD halt pauses the broader market	It does not. Only an SPX-level threshold triggers a market-wide halt.
An SPX halt and a LULD halt are the same mechanism	They are entirely separate frameworks with independent triggers.