A circuit breaker is a requirement that a securities exchange shut down:
A)permanently if prices drop by a specified percentage.
B)temporarily if prices drop by a specified percentage.
C)temporarily if prices drop by 100%.
D)if trading reaches over one million shares sold in a single day.

Question

Quizplus · Accepted Answer

A circuit breaker is a mechanism used by securities exchanges to temporarily halt trading in the event of abnormal market declines. The threshold for triggering a circuit breaker is usually based on a percentage decline of the market index, such as the S&P 500 or Nasdaq Composite. For example, the NYSE and Nasdaq both use a circuit breaker that temporarily halts trading for 15 minutes if the S&P 500 drops 7% in a single day, and again if it drops 13%, and again if it drops 20%. Therefore, the correct answer is B, as a circuit breaker is used to temporarily halt trading if prices drop by a specified percentage.

A Circuit Breaker Is a Requirement That a Securities Exchange