Circuit-breaker

(1) The rules of the New York Stock Exchange are currently followed in North America for stock markets and equity derivatives markets: the trading halt can last from half an hour to the end of the trading day, depending on the severity of the decline (10%, 20% or 30% of the Dow Jones Industrial Average) and the time of day it occurs. For example, in the event of a 10% decline, trading is halted for 1 hour if the threshold is reached before 2:00 p.m., ½ hour if it is reached between 2:00 p.m. and 2:30 p.m., and trading continues if the 10% threshold is reached after 2:30 p.m. However, in the event of a 30% drop, trading is halted for the rest of the day, regardless of the time the threshold is reached. The Toronto Stock Exchange and the Montreal Exchange adopted these rules for stocks and equity derivatives (Policy T-3, Circuit Breaker, of the Montreal Exchange), also based on the Dow Jones Industrial Average. (2) Circuit-breakers are intended as an exceptional measure and are triggered only in situations of extreme market volatility. Since their implementation as a result of the 1987 crash, they were activated on only one day, October 27, 1997, when the Dow Jones lost 350 points (representing 4.5% of the previous day's price). At that time, thresholds were set in absolute amounts. At their current level, they would only have been triggered twice since the Dow Jones Industrial Average was established, i.e. during the 1929 October crash and the 1987 October crash.