Circuit Breakers
On the New York Stock Exchange (NYSE), one type of trading curb is referred to as a "circuit breaker." These limits were put in place after Black Monday in order to reduce market volatility and massive panic sell-offs, giving traders time to reconsider their transactions.
At the start of each quarter, the NYSE sets three circuit breaker levels at levels of 10%, 20%, and 30% of the average closing price of the Dow Jones Industrial Average for the month preceding the start of the quarter, rounded to the nearest 50-point interval. As of the first quarter of 2013, these levels are 1,300 points, 2,650 points, and 3,950 points respectively. Depending on the point drop that happens and the time of day when it happens, different actions occur automatically:
Trading curbs on Dow futures contracts traded on the Chicago Board of Trade are based on NYSE levels, with the exception that only the 10% threshold is in effect outside of regular NYSE trading hours, and is relative to the previous daily settlement price.
Read more about this topic: Trading Curb
Famous quotes containing the word circuit:
“We are all hostages, and we are all terrorists. This circuit has replaced that other one of masters and slaves, the dominating and the dominated, the exploiters and the exploited.... It is worse than the one it replaces, but at least it liberates us from liberal nostalgia and the ruses of history.”
—Jean Baudrillard (b. 1929)