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Explain the Role of the “Circuit Breaker” Mechanism in Exchange Operations

Automated trading halt triggered by extreme volatility to prevent panic selling and allow market reassessment.
Greeks.Live20.11.25

Explain the Role of the “Circuit Breaker” Mechanism in Exchange Operations.

A circuit breaker is an automated trading halt implemented by an exchange when price volatility exceeds a predetermined threshold. Its purpose is to pause trading, allow market participants to assess the situation, and absorb information, preventing panic selling from causing a complete market collapse.

Crypto exchanges rarely use them, contributing to higher volatility.

What Is the Purpose of a “Circuit Breaker” in Traditional Markets?
What Is a ‘Circuit Breaker’ and How Is It Designed to Prevent Flash Crashes?
How Do Circuit Breakers on an Exchange Affect Margin Calculations during Extreme Volatility?
How Do Exchanges Use ‘Circuit Breakers’ to Manage Leverage-Induced Volatility?

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