A market-wide circuit breaker is a regulatory measure that temporarily halts trading on all Canadian marketplaces (exchanges and alternative trading systems (ATSs)) if there is an extraordinary stock market decline. During this time, you will not be able to buy or sell stocks on any Canadian marketplaces, including the Toronto Stock Exchange. This type of circuit breaker is meant to limit panic-selling and give investors time to assess information.
3 levels of circuit breakers
While market-wide circuit breaker events are historically uncommon, these procedures are an important safeguard to maintain fair and orderly markets, and foster investor confidence.
In Canada, the Canadian Investment Regulatory Organization (CIRO) is the regulator responsible for market-wide circuit breaker rules. CIRO consolidated the operations of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA). It oversees all investment dealers, mutual fund dealers and trading activity on Canada’s debt and equity marketplaces.
There are 3 levels of market-wide circuit breakers triggered when price declines reach certain thresholds.
| Level | Price decline compared to previous trading day | Length of trading halt |
|---|---|---|
| Level | Price decline compared to previous trading day | Length of trading halt |
| 1 | 7% | 15 minutes* |
| 2 | 13% | 15 minutes* |
| 3 | 20% | Rest of the day |
*No trading halt if price decline happens after 3:25 p.m., unless there is Level 3 halt. Click here for Universal Market Integrity Rules.
Market-wide circuit breakers are triggered based on changes in the value of the S&P 500 Index. If markets in the United States are not open, the S&P/TSX Composite Index is used to determine circuit breaker thresholds.
Key Point
A market-wide circuit breaker is triggered when there is a severe price decline. This type of circuit breaker is meant to limit panic-selling, give investors time to assess information, and maintain fair and orderly markets.
