Market-wide circuit breakers

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 marketStock market The collection of markets and exchanges where stocks, bonds and other securities are issued or traded.+ read full definition 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.

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 Investment Industry Regulatory Organization of Canada (IIROC) is the regulator responsible for market-wide circuit breaker rules.

3 levels of circuit breakers

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
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 IIROC Universal Market Integrity Rules.

Market-wide circuit breakers are triggered based on changes in the value of the S&P 500 IndexIndex A benchmark or yardstick that lets you measure the performance of a stock market, part of a stock market or a single investment. Examples: S&P/TSX, S&P/TSX Canadian Bond Index.+ read full definition. 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.

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