What Is the New York Stock Exchange's Limit Up-Limit Down Plan?

Last night, the S&P 500 futures dropped 5%, which triggered a circuit breaker. 

But what exactly does that mean?

As we approach the opening bell, here's what investors need to know about the New York Stock Exchange's Limit Up-Limit Down plan. 

Video Transcript:

Let’s talk about the limit down plan. So, what exactly am I talking about? It’s a circuit breaker.

The Limit Up-Limit Down plan, at the New York Stock Exchange, can be activated during regular trading hours--meaning 9:30 am to 4 pm. The plan was put into effect following the May 2010 flash crash.

Now I want to note that this plan has never been enacted in their current form during regular trading hours.

There are three levels to this plan, according to the New York Stock Exchange.

The first level is if the S&P 500 drops 7%, then trading will pause for 15 minutes.

However, level two comes into play if the S&P 500 drops 13%, trading will again pause before 15 minutes if the drop happens on or before 3:25 pm. There’s no halt after that.

And, finally, level 3 would be enacted if the S&P 500 falls 20%. Trading will then halt for the remainder of the day.

We’ll keep you updated on the markets over on TheStreet.com

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