Circuit Breakers and Trading Halts: When Markets Stop

Market-wide circuit breakers

The thresholds are based on the prior day close and reset daily. Level 1 and Level 2 halts do not apply after 15:25 Eastern, on the reasoning that a pause near the close would be more disruptive than helpful. A Level 3 halt ends the session entirely.

Single-stock halts

Limit up-limit down bands are the most common in normal conditions. They define a percentage band around a rolling reference price; if the stock trades outside the band and does not return within fifteen seconds, a five-minute halt follows. The band width varies with the stock’s price and its tier.

Futures limit moves

Many futures contracts have daily price limits. When the price reaches the limit, trading may be restricted to prices within the band or halted entirely, depending on the contract and the exchange.

• Limit up or limit down means the market cannot trade beyond that price for the session, or until the limit is expanded.
• Locked limit means there are orders on one side only and no trading is occurring at all. Your position cannot be exited at any price.
• Expanded limits apply on subsequent days in some contracts, allowing the market to find its level over several sessions.
• Equity index futures typically have overnight limits and a different structure during regular hours, coordinated with equity circuit breakers.
• Agricultural and energy contracts have historically locked limit for multiple consecutive sessions during supply shocks.
• The practical implication is that a leveraged futures position can accumulate losses across several days with no ability to exit.

What to do when you hold a halted position

1. 1

   Determine the reason for the halt

   Volatility halts usually reopen within minutes near the halt price. News-pending halts frequently reopen far away. Regulatory halts can last days and reopen much lower.

2. 2

   Do not place a market order into the reopening

   The reopening auction can print far from the halt price. A market order accepts whatever that price is.

3. 3

   Check the indicative reopening price

   Exchanges publish indicative prices during the halt. It moves as orders accumulate and gives some idea of where the reopen will occur.

4. 4

   Reassess the position from the new price

   If the stock reopens 40 percent lower, your original thesis and your original stop are both irrelevant. Decide based on the new situation.

5. 5

   Check your margin position

   A large adverse reopen can trigger a margin call immediately. Knowing your buffer before the reopen is better than discovering it afterwards.

6. 6

   Record what happened

   Halts are rare enough that each one is a learning opportunity about your own exposure and your broker’s behaviour.

Planning for halts before they happen

• Size positions assuming you cannot exit. This is the same discipline that protects against gaps, and it protects against halts for the same reason.
• Avoid concentration in halt-prone instruments. Low-float stocks, recent listings, and heavily promoted names halt far more frequently.
• Know your broker’s behaviour. Some brokers cancel resting orders on a halt; others leave them active into the reopening auction.
• Be cautious with stops in volatile small caps. A stop can trigger during the move into a halt and fill at the extreme.
• Understand that options on a halted underlying may also halt, removing the hedging route as well.
• In futures, check the daily limit for any contract you trade, and model what a locked limit move would cost you.