Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• CIRCUIT BREAKER
  
  After the stock market crash of 1987, stock and commodities exchanges established a system of trigger-point rules, known as circuit breakers, to temporarily restrict trading in stocks, stock options, and stock index futures when prices fall too far, too fast. Currently, trading is halted when the market, measured by the Dow Jones Industrial Average (DJIA), drops 10%. But trading could resume, depending on the time of day the drop occurs. If the DJIA drops 20%, trading ends for the day. The actual number of points the DJIA would need to drop is set twice a year (in January and June) based on the average value of the DJIA in the previous month. The only time the circuit breakers have been triggered was on October 27, 1997, when the DJIA fell 554 points, or 7.2%, and the trigger levels were lower. In fact, the DJIA has dropped as much as 10% in a single day only three times in its history.
  
  Back