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Finance Dictionary and Glossary of Investment Terms
Circuit Breaker
Definition 1.
Refers to any number of measures which can be used by stock exchanges during large sell-offs. After an index has fallen a certain percentage, actions such as trading halts or restrictions on program trading can be taken. Sometimes called a 'collar.'
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Definition 2.
Any of a number of procedures implemented by a major stock or commodity exchange when a certain index falls a predetermined amount in a session, to prevent further losses. Examples include trading halts and restrictions on program trading.
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Definition 3.
A procedure that temporarily halts trading on all U.S. stock markets for one hour when the Dow Jones Industrial Average falls 250 points or more within a trading day. The pause is designed to allow time for the markets to absorb the news that precipitated the decline. Should the average fall another 150 points within the same day, trading would again be halted, this time for two hours.
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