Circuit Breaker

Business, Legal & Accounting Glossary

Definition: Circuit Breaker



Full Definition of Circuit Breaker


The stock market circuit breaker has the same purpose as the electric switch in most homes: to shut the system down when the load becomes too high, giving it time to cool off and prevent a meltdown. The load limited by the circuit breaker is rapid downward movement of prices. The circuit breaker is supposed to disrupt herd behaviour and ease capacity constraints. The circuit breaker was conceived after subsequent investigation of the Black Monday sell-off of 1987 revealed that crashing computers, clogged phone lines, and other capacity bottlenecks exacerbated the decline. The first major test of the circuit breaker system occurred ten years later on another October Monday, when a drop in the Dow triggered first a 30-minute pause circuit breaker then an early close for the day. Today, the NYSE circuit breaker actions depend upon the time of day and magnitude of market decline, whether 10, 20, or 30 per cent. The circuit breaker triggers are revised quarterly to adjust for market level. Other US exchanges have similar circuit breaker procedures.


Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/circuit-breaker/
Modern Language Association (MLA):
Circuit Breaker. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. November 26, 2020 https://payrollheaven.com/define/circuit-breaker/.
Chicago Manual of Style (CMS):
Circuit Breaker. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/circuit-breaker/ (accessed: November 26, 2020).
American Psychological Association (APA):
Circuit Breaker. PayrollHeaven.com. Retrieved November 26, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/circuit-breaker/

Definition Sources


Definitions for Circuit Breaker are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 4th February, 2020 | 10 Views.