Circuit breakers are regulatory mechanisms that temporarily halt trading when markets move too sharply, giving investors time to assess information calmly.
Asian Circuit Breaker Rules
| Market | Level 1 | Level 2 | Level 3 |
| India | 10% drop → 45min halt | 15% → 1hr 45min | 20% → full day |
| China | Individual: 10% daily limit | Market-wide: tested in 2016, removed | |
| Japan | Individual: varies by price | Futures: 8% limit | |
| South Korea | 8% drop → 20min halt | 15% → 20min | 20% → full day |
China's Circuit Breaker Disaster (2016)
China introduced market-wide circuit breakers in January 2016. They triggered twice in the first week, causing more panic as traders rushed to sell before the next halt. The system was abandoned after just 4 days.
When Circuit Breakers Activate
Major events: COVID crash (March 2020), US-China trade war escalation, currency crises, geopolitical shocks.