Trading on the New York Stock Exchange was halted briefly Monday morning when the S&P 500 index fell 7%. Here's how these automatic circuit breakers work 👇
The circuit breakers"are designed to slow trading down for a few minutes, to give investors the ability to understand what's happening in the market, consume the information and make decisions based on market conditions," New York Stock Exchange President Stacey Cunningham"It's really a precautionary measure that we put in place so that the market can slow down for a minute," she said.of Oct. 19, 1987, when the Dow plunged 508 points, or 22%.
"There was this idea that if you stopped trading and gave a pause, then people would calm down and it might stabilize the markets," said Mason Gerety, professor emeritus at Northern Arizona University and a former research economist at the Securities and Exchange Commission.His research in the early 1990s found a trade-off to the temporary halt. Traders might sell off more quickly if they anticipate a circuit breaker kicking in.
"The fact that there's a circuit breaker might actually be more likely to get you to the circuit breaker. It's kind of almost like a gravitational pull," Gerety said. "People who do this for a living — I've never met one who felt like they needed to catch their breath," he said."They have good lungs. They are used to stress."
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