What is a circuit breaker (financial term)?

"Circuit breaker" is an emergency brake for stock trading in the financial world, a rule set by an exchange or supervisor that temporarily halts trading to temper panic reactions.

For example, if the share price drops by a certain percentage (e.g. 15%) within one trading day, trading can be interrupted for a specific period, such as half an hour (also called a 'freeze'). This mechanism is intended to calm the markets and prevent panic sales from further destabilising the market.

Circuit breakers are similar to the 'emergency stop' or 'emergency brake' and are applied to manage unexpected price drops and restore stability.