US circuit breakers are mechanisms that halt trading when the S&P 500 index drops by 7%, 13%, or 20% in a single session, according to an SEC bulletin dated 2026. A separate mechanism, specific to each stock, works in parallel to keep each security’s price within set bands: the limit up-limit down mechanism. Both rules apply only to US-listed equity markets and guarantee neither execution nor any particular price level.
The three thresholds of market-wide circuit breakers
According to the SEC, a market-wide trading halt can be triggered at three levels of decline in the S&P 500 index recorded within a single day: 7% for Level 1, 13% for Level 2, and 20% for Level 3. These thresholds are not fixed percentages carried over year to year: they are point levels recalculated each day based on the prior day’s closing price of the S&P 500 index, the same source specifies.
Before the February 2013 reform, the thresholds were different: 10%, 20%, and 30%, and they were based on the Dow Jones Industrial Average rather than the S&P 500, the SEC notes. This change in reference index and thresholds explains why older articles or accounts cite figures different from those in effect today.
What each level triggers, depending on the time of the session
The length of the pause depends on the level reached and, for the first two levels, on the time at which it occurs. A Level 1 or Level 2 trigger before 3:25 p.m. Eastern Time halts trading across the entire market for fifteen minutes; the same trigger occurring at or after 3:25 p.m. does not halt trading at all, according to the SEC bulletin. A Level 3 trigger, on the other hand, halts trading across the entire market for the rest of the trading day, regardless of the time at which it occurs.
| Level | Decline threshold | Effect if triggered before 3:25 p.m. ET | Effect if triggered at or after 3:25 p.m. |
|---|---|---|---|
| Level 1 | 7% | 15-minute halt | No halt |
| Level 2 | 13% | 15-minute halt | No halt |
| Level 3 | 20% | Halt for the rest of the day | Halt for the rest of the day |
The limit up-limit down mechanism, specific to each stock
Alongside market-wide circuit breakers, a second mechanism applies stock by stock: the limit up-limit down mechanism, or LULD. According to the SEC, this mechanism keeps each stock’s price within bands of 5%, 10%, 20%, or the lesser of $0.15 and 75%, depending on the stock’s price and its tier classification. If the price reaches that band and does not naturally return within it in fifteen seconds, trading in that single stock is halted for five minutes, the same source specifies.
LULD applies during regular trading hours, from 9:30 a.m. to 4:00 p.m. Eastern Time, and its price bands double during the last twenty-five minutes of the session for Tier 1 stocks as well as for Tier 2 stocks priced at $3 or less. Tier 1 stocks include components of the S&P 500, the Russell 1000, and certain exchange-traded products; Tier 2 stocks include all other National Market System securities, except rights and warrants, according to the SEC.
The SEC approved this mechanism on May 31, 2012, to replace the former single-stock circuit breakers, with a two-phase rollout whose first phase began on April 8, 2013.
What these rules do not cover
Market-wide circuit breakers and the limit up-limit down mechanism govern US-listed equity markets, that is, National Market System securities. They do not apply to Forex, CFDs, or futures markets, whose own pause mechanisms, where they exist, follow separate rules specific to each platform or clearinghouse. A trading halt is also neither a guarantee of execution at a given price nor protection against a loss: it interrupts trading, it does not undo it.
To place these thresholds in recent context, the briefing on October CPI coming in above forecast and the one on Wall Street’s worst session of the year describe days when the S&P 500 approached, without always crossing, these same thresholds.
Frequently asked questions
Can a market-wide circuit breaker trigger more than once in the same day?
Yes: the three levels are independent and can occur in succession within the same session if the decline in the S&P 500 index worsens. A Level 1 trigger followed by a Level 2, then a Level 3, would thus produce two fifteen-minute pauses before a halt lasting through the end of the day, according to the rules described by the SEC.
Is the 7% threshold always the same number of index points?
No. According to the SEC, the thresholds are recalculated each day based on the prior day’s closing price of the S&P 500 index: 7% of an index that closed higher the day before therefore represents a different number of points from one day to the next.
Does the limit up-limit down mechanism prevent a stock from losing all its value?
No, it does not prevent that over time: it slows the price adjustment by imposing price bands and five-minute pauses if the price departs from them persistently, but it sets neither a final floor nor a final ceiling, according to the SEC’s description of it.
Do these rules also apply to Forex trading on a prop trading platform?
No. Market-wide circuit breakers and the limit up-limit down mechanism specifically govern equities listed on US markets regulated by the SEC; they do not govern Forex or CFD trading, which follow rules specific to each broker or platform.