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Quantitative Finance · Glossary

What is Limit up–limit down and market-wide circuit breaker?

Also known as: limit up--limit down · market-wide circuit breaker

Definition 31.2 Markets I: The Ecosystem and Exchange-Traded Markets · Chapter 31 — Stress Case Studies

Limit up–limit down is the US mechanism, introduced after 2010, that prevents trades in a security outside a band around a moving reference price and pauses trading if the market stays at the band. A market-wide circuit breaker halts all equity trading when a broad index falls by set percentages in a day (Chapter 14).

Limit-up-limit-down halts on 24 August 2015. The funds that halted did so three times each on average. Data: the regulator’s research note of December 2015.
Figure 31.2. Limit-up-limit-down halts on 24 August 2015. The funds that halted did so three times each on average. Data: the regulator’s research note of December 2015.
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