What Are Stock Market Circuit Breakers? The 7%, 13% and 20% Rules

US market-wide circuit breakers can temporarily stop trading after very large drops in the S&P 500 Index. The thresholds are measured from the previous trading day’s closing level: 7%, 13% and 20%. These rules aim to reduce disorderly trading during extreme volatility.

What happens at each level

A 7% decline is a Level 1 trigger and a 13% decline is Level 2. If either occurs during the eligible part of the regular session, trading pauses for 15 minutes. A 20% decline is Level 3 and stops trading for the rest of that trading day.

Does the time of day matter?

Yes. Under current US rules, Level 1 and Level 2 market-wide halts are triggered before 3:25 p.m. Eastern time during the regular session. Level 3 can occur during the trading day regardless of that earlier cutoff.

Are stock-specific halts the same?

No. Individual stocks may pause under the separate Limit Up-Limit Down mechanism if their prices move beyond designated bands. A single-company halt does not mean the whole stock market has stopped.

What happens to an order during a halt

Broker rules and exchange reopening procedures determine how orders are managed. Some orders may remain pending; others can be cancellable. Investors should check the broker’s order status rather than assuming execution.

Why a halt does not guarantee a rebound

A pause creates time for markets to process information. It does not stop fundamental changes in a company or economy, and prices can continue moving after trading resumes.

Quick takeaways

• A 7% decline is a Level 1 trigger and a 13% decline is Level 2.
• No.
• A pause creates time for markets to process information.

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