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What is Circuit Breaker?
It is a measure used by stock exchanges during large sell-offs to avert panic selling.

Futures contracts for the Dow and the S&P 500 fell so low they triggered "circuit breakers". That slide raised the possibility that circuit breakers intended to prevent panic selling could be triggered during regular trading -- something that hasn't happened since 1997.

The thresholds that would trigger a halt in trading are set at a decline of 10 percent, 20 percent and 30 percent in the Dow, based on where that index was at the beginning of the current quarter; that would mean declines of 1100 points, 2200 points and 3300 points, respectively.

If the Dow Jones industrial average falls 1100 points before 2 pm, the market will shut down for an hour. If the threshold is breached between 2 pm and 2:30 pm, the halt will last 30 minutes. Trading would stop again if the Dow falls by 2200 points. If the Dow falls by 3300 points at any time, trading would be halted for the day.

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Angie said... @ October 25, 2008 at 5:51 AM

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