What are Circuit Breakers?

Circuit Breakers are basically measures in stock markets in percentage terms which initiate an automatic check in case of any runaway situation concerning any security or index in either direction. These percentage values of the breakers are usually computed on the basis of the last closing level of the security or the index. These can be used for both stocks and indices.

In Indian markets, they are in place on various stocks with usual values of 2%, 5%, 10% and 20%. Derivatives do not have circuit breakers. In Indian markets, there is a market-wide circuit breaker which is index-based. It is applicable at three stages of the movement of the index on either side viz. 10%, 15% and 20%. On triggering these initiate a complete halt on equity and derivative markets across the nation. The trigger is usually pulled by BSE Sensex or the Nifty50.