Stock exchanges attempt to ease panic selling by taking certain steps to halt trading. These moves are called market circuit breakers—or collars. Under extreme conditions that could trigger market disruptions, exchanges can invoke Rule 48 to make it easier and faster to open stocks.

When do market circuit breakers kick in?

Trader on the floor of the New York Stock Exchange. Getty Images

Under the revised rules approved by the SEC in 2012, market-wide circuit breakers kick in when the drops 7 percent (Level 1), 13 percent (Level 2), and 20 percent (Level 3) from the prior day's close. A market decline that triggers a Level 1 or Level 2 circuit breaker before 3:25 p.m. will halt market-wide trading for 15 minutes, while a similar market decline "at or after" 3:25 p.m. will not halt market-wide trading. For Thursday, Jan. 7, the market-wide circuit breaker levels are:

Level 1 = 1,850.94

Level 2 = 1,731.52

Level 3 = 1,592.20

When were market circuit breakers first conceived?

The markets instituted circuit breakers in the wake of 1987's "Black Monday." On Oct. 19, 1987, the market plunged 508.32 points, 22.6 percent, or $500 billion lost in one day. This was the largest one-day percentage drop in history until that time.

Circuit breakers were first used in October 1989, following a major stock market drop. Until 1997, the markets used a point drop rule—that is, looking at how many points the markets declined, rather than the percentage of the move, to trigger circuit breakers to stop trading. (Get the latest on the markets.)

What is Rule 48?