As stocks drop, NYSE offers refresher on 'circuit-breakers'

They're designed to reduce volatility in trading

Fears that the major US financial markets would follow other markets as they dropped on Friday prompted the New York Stock Exchange (NYSE) to highlight rules about market-wide trading halts that kick in when indices plummet below certain pre-defined levels.

Those 'circuit breaker' levels are designed to reduce market volatility by forcing a pause in trading activity for certain periods of time. The NYSE posted a note on its Web site explaining the rules following what it said were questions about how circuit-breakers work. Circuit breakers to stem futures trading kicked in before the markets opened in New York on Friday after markets elsewhere in the world fell sharply.

The NYSE ended the day off by more than 300 points; The technology-laden NASDAQ shed 51 points. Neither was anywhere near as large as the sharp sell-off late last month.

Basically, circuit breakers are used to cut off automated trading program connections between large brokerage houses and the computers on the NYSE trading floor for varying lengths of time, depending in the severity of the decline and the time of the day it happens, according to the exchange's Invest FAQ.

Larger brokerage houses "have their computers directly connected to the trading floor on the stock exchanges, and hence can program their computers to place direct huge buy/sell orders that are executed in a blink," the FAQ said. "This automated connection allows them to short-cut the individual investors who must go thru the brokers and the specialists on the stock exchange."

Because of the speed with which trades can take place -- in microseconds -- circuit breakers are aimed at slowing a market crash.

In an indication of how worried traders were Friday morning, the NYSE took the unusual step of posting a statement on its blog confirming that trading would begin as usual at 9:30 a.m. The move was aimed at addressing widespread rumors about the exchange being closed or delayed.

NYSE introduced circuit breakers to halt trading during periods of "extraordinary volatility" like that seen in recent weeks. The rules detail how far the Dow Jones Industrial Average must drop for the trading halts to kick in. The trigger points are set at 10, 20 and 30 percent of the value of the DJIA -rounded off to the nearest 50 at the beginning of each calendar quarter. The DJIA had an average value of 11,000 at the beginning of the fourth quarter.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags wall streetnyse

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Jaikumar Vijayan

Computerworld (US)
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Jack Jeffries


As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr


The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?