Circuit Breakers and Sidecars: How Stock Markets Hit the 'Emergency Stop'
When prices move violently in a short span, the Korea Exchange (KRX) uses safety brakes that briefly halt trading to keep a market from collapsing into overheating or panic. The two best known are the 'sidecar' and the 'circuit breaker.' The names sound alike, but their triggers and how much they freeze are different.
Sidecar — A 5-Minute Freeze on Program Trades Only
A sidecar triggers when futures move 5% or more from the reference price (6% for KOSDAQ 150 futures) and stay there for one minute. At that point the quotes for program trading (large automated orders) are frozen for five minutes. Ordinary stock trading itself continues, and it can fire only once a day.
Circuit Breaker — Halting the Whole Market in Three Stages
A circuit breaker (CB) halts trading across the entire market when the index falls sharply. It is split into three stages by the size of the drop.
| Stage | Trigger (vs. previous close) | Action |
|---|---|---|
| Stage 1 | Index down 8%+ for one minute | All trading halted 20 min, then a 10-min single-price reopen |
| Stage 2 | Down 15%+ and 1%p more than Stage 1 | Trading halted 20 min, then reopens |
| Stage 3 | Down 20%+ | The day's trading ends immediately |
Each stage can fire only once a day. Stages 1 and 2 are not triggered after 2:50 p.m. (40 minutes before the close), but Stage 3 can fire right up to the closing bell. Both the sidecar and the circuit breaker apply separately to KOSPI and KOSDAQ.