Definition of "Circuit Breakers"

Procedures established to forestall the market from spiraling down. Circuit breakers will "kick-in" when the market has dropped by a specific amount within a certain period. At that time, the major stock and commodities exchanges will temporarily stop trading in stocks and stock index futures to give floor traders time to rebalance buy and sell orders. Circuit breakers were introduced in 1987 after Black Monday. The levels were revised when the market had another steep drop in October 1989.