Circuit Breakers and the COVID-19 Crisis

46 Pages Posted: 20 Jan 2021 Last revised: 1 Feb 2021

See all articles by Claudia E. Moise

Claudia E. Moise

Duke University, The Fuqua School of Business

Date Written: January 19, 2021


Designed to curb extraordinary volatility, (stock-level) circuit breakers lead to unnecessary trading halts, which have been prevalent during the recent COVID-19 crisis. More importantly, while created to accommodate the dissemination of fundamental information to market participants, most trading halts turn out to be illiquidity events. Halts further lead to decreases in liquidity, and impede short-term price efficiency, with results being more pronounced in smaller, less liquid securities. Finally, trading halts in (some of the) S&P500 constituents are associated with jumps in SPY (SPY is an ETF that tracks the S&P500), a finding that has further implications for risk management. The paper concludes by providing some guidance on how to improve the existing market mechanism design in dealing with rare events such as the COVID-19 crisis.

Keywords: Circuit breakers, volatility, liquidity, jumps, trading halts, market mechanism design, big data, COVID-19

JEL Classification: C14, C22, G12, G14

Suggested Citation

Moise, Claudia E., Circuit Breakers and the COVID-19 Crisis (January 19, 2021). Available at SSRN: or

Claudia E. Moise (Contact Author)

Duke University, The Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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