Circuit breaker (trading halt)

What is a circuit breaker

A circuit breaker is an exchange rule that pauses or limits trading in a stock, or in the whole market, after the price moves too far, too fast.

Exchanges use it to give traders time to absorb news and to prevent disorderly selling or buying, such as a flash crash or a fat finger error.

Upper and lower circuit

In Pakistani market news you will often see "upper circuit" and "lower circuit". These refer to the daily price limits on a stock:

• Upper circuit: the highest price the stock may trade at that day. A stock "locked at upper circuit" has buyers at the limit and few or no sellers.
• Lower circuit: the lowest allowed price. A stock "locked at lower circuit" has sellers at the limit and few or no buyers.

On PSX, the size of these bands and the rules for market-wide halts are set by the exchange and can change. Check the current PSX rulebook or notices for the exact limits. In Pakistan, listed shares are traded only through brokers licensed by the Securities and Exchange Commission of Pakistan (SECP), with trading in listed securities and commodities only via SECP-licensed securities and futures brokers.

Worked example (hypothetical)

Company X closed yesterday at a certain price. The exchange sets its upper and lower bands at a fixed percentage above and below that close.

1. Before the market opens, Company X announces unexpected results.
2. Buy orders flood in. The price rises quickly and reaches the upper band.
3. Orders to buy above the band cannot execute. Trades happen only at or below the limit, and buyers queue at the limit price.
4. Holders who wanted to sell higher must wait for the next session, when the band is recalculated from the new close.

If the same company had released bad news, the move would run the other way and lock at the lower circuit. Sellers could then find themselves unable to exit at any price during the session.

Formal definition and edge cases

For experienced traders, the precise distinctions matter:

• Price limit vs halt. A price band allows trading inside the limits. A halt stops all matching for a period. Some exchanges use both.
• Single-stock vs market-wide. A single-stock breaker reacts to one security. A market-wide breaker is triggered by a move in a benchmark index and pauses the whole market.
• Regulatory or news halt. Trading can also be suspended pending an announcement, unrelated to price movement.
• Reopening. After a halt, many exchanges reopen through an auction, similar to opening and closing auctions. The price can gap away from the last trade.
• Orders. Resting orders may be queued, cancelled or partly filled on reopening. See fill and partial fill and day order.
• Derivatives and CFDs. When the underlying exchange halts, prices of futures or CFDs on that stock or index may freeze or jump when trading resumes. Stop orders can fill far from their level.
• Spot forex. The over-the-counter currency market has no central circuit breaker. Liquidity can still thin out sharply.

Leveraged CFD and forex positions can lose money fast in a gap after a halt. See risk management.

Where you see the term

• PSX market reports and Pakistani business news, as "hit upper circuit" or "locked at lower circuit".
• Exchange notices announcing a market-wide halt after a sharp index fall.
• Platform quote windows, where a halted symbol stops updating or shows as closed or close-only.

Related terms

• Flash crash
• Black swan
• Fat tails and tail risk
• Capitulation
• Market correction
• Bear market
• Trading glossary

Frequent questions

What does trading halt mean?

Trading in a security or the whole market is paused, either because of a large price move or pending important news.

What is a circuit breaker on PSX?

It is the set of PSX rules that cap a stock's daily move (upper and lower circuit) and can pause the market after a large index move. Check PSX notices for the current limits.

Can I sell a stock stuck at lower circuit?

You can place a sell order, but it fills only if a buyer appears at or above the limit price. Often few buyers appear.

Does forex have circuit breakers?

The spot currency market has no central circuit breaker, but exchange-traded currency futures can have limits.