The New York Stock Exchange just halted trading. This CNN entry explains the benchmarks they use to do that

The New York Stock Exchange has a series of "circuit breakers" in place to calm investors' nerves when they're panicked.

A circuit breaker was tripped Monday morning shortly after trading began.

The S&P 500 fell by more than 7%, halting trading for 15 minutes.

The next circuit breaker would be if the market falls by 13%. That would pause trading for another 15 minutes.

If the market plunged 20%, everyone would go home: Trading would stop for the day.

The "pauses" make sense, but the 20% "we're done for the day" stop is new to me. What's the rationale here? Obviously nobody likes a bear market, but why stop trading entirely for the rest of the day? Is this an SEC rule or simply something NYSE came up with? And does this really halt all stock trading everywhere, or just simply slow the process down?

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    The answers are given directly in your quote. What additional information are you looking for here? – ChrisInEdmonton Mar 9 at 14:11
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    It tells you: "to calm investors' nerves when they're panicked." – user253751 Mar 9 at 14:31
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    Re: "Obviously nobody likes a bear market" -- down 20% in one day is not a bear market. It's a crash. Down 20% over six months is a bear market. – Pete Becker Mar 9 at 18:21
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    20% down? There sure are a lot of crickets around here. Have the permabulls gone into hibernation? – Bob Baerker Mar 9 at 21:42

Circuit breakers are measures approved by the Securities and Exchange Commission (SEC). This to ease panic selling. Under 2012 rules.

kick in when the S&P 500 index drops

  • Level 1 @ 7% = halt trading for 15 minutes
  • Level 2 @ 13% = halt trading for 15 minutes
  • Level 3 @ 20% = halt trading for the day

But your question is why the 20%?

This would be based on the average daily market fluctuation. The last 20% drop was 1987-10-19 or "Black Monday"(The biggest % drop ever) when the market dropped −20.47%.

top 5 - bad days on the stock market


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