Market Volatility, Circuit Breakers, and Trading Halts

What is a volatile market?

A volatile market is often characterized by extreme price fluctuations and widespread uncertainty. Nobody knows what to expect, and fear—or euphoria—can grip investors.

During these moments, it can be tough to sit still. Your investment portfolio may seemingly plummet—or soar—based on the smallest whisper: a rumor that the Fed might change interest rates, that the government may approve an industry bailout, or that the president might issue an executive order. It’s hard to guess what impact each development could have on the stock market.

What’s a circuit breaker?

After the 1987 stock market crash, known as “Black Monday,” the US Securities and Exchange Commission adopted market-wide circuit breakers, or certain thresholds at which trading is halted for a pre-defined period of time. These circuit breakers were updated in 2012 in order to make them more meaningful in today’s high speed electronic markets.

Market-wide trading halts are designed to curtail panic selling during volatile periods. When these take effect, all trading temporarily stops on US equities, options, and futures exchanges.

What’s a market-wide trading halt?

A market-wide trading halt is like a timeout. It gives everybody a chance to catch their breath and may help slow the stampede of a selloff. Halts are issued by US equities, options, and futures exchanges.

There are three circuit breakers that can trigger market-wide halts in the US:

  • Level 1: The S&P 500 drops 7% from its closing price the previous day, triggering a 15-minute trading halt.
  • Level 2: The S&P 500 drops 13% from its closing price the previous day, triggering another 15-minute trading halt.
  • Level 3: The S&P 500 drops 20% from its closing price the previous day, and trading is suspended for the remainder of the day.

It’s worth noting, Level 1 and Level 2 halts may only happen once per trading day. That means, if the S&P 500 slides by 7% (resulting in a 15-minute timeout), trading would only stop again if the decline reaches 13% or more. Likewise, if the S&P 500 drops by 13% (again, resulting in a 15-minute suspension), trading would only cease if the downturn reaches 20%.

Please keep in mind, Level 1 and Level 2 circuit breakers can only take effect before 3:25pm ET. At 3:25pm ET and beyond, only a Level 3 halt—a 20% decline in the S&P 500—would cause trading to stop for the day.

Regular US stock market trading hours are 9:30am – 4:00pm ET.

Can I place new orders during a trading halt?

Yes, you can place new orders during a trading halt but they won’t be processed until the market reopens.

Note that all new and outstanding orders will remain “pending” until markets reopen. When the halt ends, your orders will be processed. Please note that market orders held or placed during a halt may fill at a very different price once trading resumes.

Can I use Robinhood during a trading halt?

Yes, Robinhood will still function. You will be able to view your positions, read your newsfeed, and contact support during a trading halt. While you can place new orders during the halt, they won't be processed until the market reopens.

What happens to my pending orders during a trading halt?

Outstanding orders, including market and limit orders, won’t be processed until the halt is over and markets reopen; this also applies to options and fractional share orders. Please note that market orders held or placed during a halt may fill at a very different price once trading resumes.

Why are charts flat during a trading halt?

When trading is halted, charts reflect the price of the last filled order. No trades are being executed, so prices neither rise, nor fall. Rest assured, the price most likely didn’t flatline at zero. When the market reopens, the chart will display normally again.

Why do options prices display as $0.01 during a trading halt?

During a trading halt, no orders are being processed so the “mark price” defaults to the $0.01 on your Robinhood app. Market prices will display normally after the halt is over.

Can I still trade cryptocurrency during a trading halt?

Yes. Halts imposed by US equities, options, and futures exchanges do not directly affect cryptocurrency trading.

Can I deposit and/or withdraw funds during a trading halt?

Yes. You can deposit or withdraw funds as you normally would.

I have a concern about an order placed during a trading halt.

If you believe one of your orders was affected by a trading halt and still have questions, please get in touch with our support team. Please provide as much information as you can about the order(s) you placed and share any questions. We’re happy to assist you.

Reference No. 20200315-1120108-3368879
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