Stock Market Circuit Breakers: Levels, LULD, and Resumption

Stock market circuit breakers are automatic trading halts that pause activity when prices fall sharply, either across the whole market or in a single security. The system has two main layers: market-wide breakers tied to the S&P 500, and the Limit Up-Limit Down plan for individual stocks. Both exist so buyers and sellers can pause and reassess instead of selling into a free fall.

The Three Market-Wide Levels

Market-wide breakers measure the S&P 500 against its prior-day closing price. When the index drops enough to hit a threshold, every national securities exchange halts at the same time.

A 7% decline (Level 1) pauses trading across all exchanges for at least 15 minutes. The halt can only trigger between 9:30 a.m. and 3:25 p.m. Eastern.
A 13% decline (Level 2) triggers another 15-minute minimum pause, with the same 3:25 p.m. cutoff.
A 20% decline (Level 3) shuts trading down for the rest of the day and can be triggered at any point during the session.

The 3:25 p.m. cutoff for the first two levels exists because a 15-minute halt that close to the 4:00 p.m. close would accomplish little and could trap orders heading into overnight markets. A 20% drop is severe enough to justify closing regardless of the clock. After a Level 3 halt, exchanges publish a trading-resume message before 4:00 a.m. the next business day, and order entry begins at the usual pre-market times.¹

Single-Stock Pauses Under Limit Up-Limit Down

While market-wide breakers respond to broad index declines, the Limit Up-Limit Down plan (LULD) prevents wild swings in individual securities. LULD sets price bands above and below a stock’s average trading price over the preceding five minutes. If the price touches a band and stays there longer than 15 seconds without returning inside, the primary listing exchange triggers a five-minute pause.²

The width of those bands depends on how the security is classified. Tier 1 covers stocks in the S&P 500, the Russell 1000, and select exchange-traded products. Tier 2 covers every other stock on a national exchange, excluding rights and warrants.²

For stocks priced above $3.00, Tier 1 gets a 5% band and Tier 2 gets a 10% band during regular hours. Stocks between $0.75 and $3.00 in either tier get a 20% band. Stocks under $0.75 get bands set at the lesser of $0.15 or 75%. In the final 25 minutes of the session (3:35 p.m. to 4:00 p.m.), all percentage bands double to account for the higher volatility that typically accompanies the close.³

The Short Sale Circuit Breaker

A separate mechanism, the SEC’s alternative uptick rule under Regulation SHO, activates when a stock drops 10% or more from its previous close during a single trading day. Once triggered, short sellers can only execute at a price above the current national best bid for the rest of that day and the entire following trading day.⁴

This one does not stop trading. Buying, selling, and even short selling continue. The restriction only requires short sales to be priced above the best bid, which makes it harder to pile onto a decline that is already underway.⁵

How to Tell if a Halt Is Active and Why

When trading stops, official exchange data feeds broadcast a notification with the ticker, the time trading stopped, the expected resumption time, and a reason code. You can monitor these on the Nasdaq Trader halt page or the NYSE’s status dashboard without a professional terminal.

The reason codes tell you what to expect:

M signals a market-wide volatility halt triggered by a circuit breaker on the S&P 500. Every stock is affected.
LUDP is a Limit Up-Limit Down pause on an individual security. These last five minutes.
T1 means trading is halted because material news is pending. The halt has no fixed duration. Trading resumes after the exchange confirms the news has been disseminated.
T3 follows T1, indicating the news has been released, and includes two timestamps: when you can begin entering orders and when the stock will reopen for trading.⁶

The difference between a T1 halt and an LUDP pause matters for planning. An LUDP reopens in five minutes, so you know when to expect activity. A T1 could last ten minutes or several hours. If you see a T1 code on a stock you own, the halt will not lift until you see the matching T3 code with resumption times.

How Trading Resumes

Reopening is not a switch flip. Exchanges run a structured auction to find a stable price before continuous trading starts again. On Nasdaq, the sequence begins with a 15-minute display-only period during which you can enter, modify, and cancel orders but no trades execute. The exchange uses this window to build an order book and gauge supply and demand.⁷

If orders can be matched without an imbalance, the exchange runs a closing cross that sets the reopening price at the level where the most shares can trade. If a significant imbalance remains after 15 minutes, the display-only period extends another five minutes and the auction collar prices adjust. That five-minute extension can repeat until the imbalance clears.⁷

The reopening price can differ dramatically from the pre-halt price. Once the auction completes, the stock returns to normal continuous trading.

What to Do With Your Open Orders

You can place, modify, and cancel orders while a halt is in effect. Nothing executes until the reopening auction, but the order book stays active. The biggest mistake retail investors make is leaving market orders open through a halt.

A market order in the reopening auction fills at whatever clearing price the auction produces, with no price protection. If a stock was trading at $50 before a news-pending halt and reopens at $35, your market buy fills at $35. If it reopens at $72, your market sell fills at $72. Reopening prices 40% or more away from the pre-halt level are not unheard of. A limit order gives you a ceiling or floor. Unless you specifically want exposure to whatever price the auction produces, convert any open market orders to limit orders while the halt is on.

After-Hours Trading Has No LULD Protection

LULD only applies during regular trading hours, 9:30 a.m. to 4:00 p.m. Eastern. Pre-market and after-hours equity sessions have no automatic single-stock pauses, so individual prices can move without triggering a halt.²

S&P 500 futures on CME do have overnight guardrails. Between 5:00 p.m. and 8:30 a.m. Central, a hard 7% price limit applies in both directions, calculated from the 3:00 p.m. futures fixing price. Within that window, dynamic circuit breakers also activate: if the contract moves more than 3.5% within an hour, trading pauses for two minutes.⁸

The practical point: after-hours equity moves on thin volume can look alarming without any automatic halt behind them. If you trade outside regular hours, LULD is not watching your back.

Options on Halted Stocks Lose Auto-Exercise

A trading halt on the underlying stock changes how options exercise works. The Options Clearing Corporation removes halted securities from automatic exercise processing, so in-the-money options at expiration will not be exercised unless your broker submits manual instructions. If you hold options on a halted stock near expiration, you or your broker must affirmatively exercise rather than rely on the standard auto-exercise process.⁹

Market-wide circuit breakers also extend to equity index futures and options on CME. A Level 3 breach terminates futures trading for the remainder of the day, as it does for equities. Level 1 and Level 2 futures halts only occur when NYSE Rule 7.12 is formally triggered in the cash equity market; if futures hit a price limit on their own without a corresponding cash halt, trading continues within the existing limits.⁸

When the SEC Steps In Directly

Beyond automated breakers, the SEC can intervene on its own. Under Section 12(k) of the Securities Exchange Act, the Commission can summarily suspend trading in an individual security for up to 10 business days if it finds the public interest and investor protection require it. The SEC can also suspend all trading on national securities exchanges for up to 90 calendar days, though that authority requires Presidential approval.¹⁰

The SEC has used the 10-day power against individual companies, usually when it suspects fraud or finds a company’s public filings materially misleading. Emergency orders under this authority can be extended if the emergency persists but cannot exceed 30 calendar days total.¹⁰

1
New York Stock Exchange. Market-Wide Circuit Breakers FAQ
2
Limit Up-Limit Down Plan. Overview of the Limit Up-Limit Down Plan
3
Nasdaq Trader. Limit Up-Limit Down FAQ
4
U.S. Securities and Exchange Commission. SEC Approves Short Selling Restrictions
5
U.S. Securities and Exchange Commission. Short Sale Price Test Restrictions – A Small Entity Compliance Guide
6
Nasdaq Trader. Trading Halts Code
7
Nasdaq Listing Center. Nasdaq Equity 4
8
CME Group. S&P 500 Price Limits – Frequently Asked Questions
9
The Options Clearing Corporation. Primer – Intro to Trading Halts
10
Office of the Law Revision Counsel. United States Code Title 15 Section 78l