How Do Market Circuit Breakers Relate to Sudden Margin Requirement Changes?
Market circuit breakers are automated mechanisms that temporarily halt trading or limit price movements when volatility reaches extreme levels. They are often triggered by the same underlying conditions that prompt exchanges to suddenly increase margin requirements.
Both mechanisms aim to reduce panic and systemic risk by pausing activity or demanding greater collateral.
Glossar
Circuit Breakers
Intervention ⎊ Circuit breakers, within cryptocurrency and derivatives markets, represent pre-defined mechanisms to temporarily halt trading during periods of substantial and rapid price declines or increases.
Market Circuit Breakers
Mechanism ⎊ Market circuit breakers are automated, pre-programmed mechanisms implemented by exchanges to temporarily halt or restrict trading activity when the price of a derivative or its underlying asset moves beyond a specified percentage threshold in a short period.
Circuit Breaker
Mechanism ⎊ Within cryptocurrency derivatives and options trading, a circuit breaker functions as a pre-programmed risk mitigation protocol, designed to temporarily halt trading activity when specified price thresholds are breached.