They don't stop people from selling. Circuit breakers are useful for one-time flukes (e.g. Flash Crash) but for sustained downturns they can actually make things worse.
If you think you _may_ want to sell at all tomorrow but also think a circuit breaker could trigger, you're going to sell first thing in the morning. So will everyone else.
The circuit breaker can actually trigger a worse panic as investors all try to squeeze in sell orders at once. This triggers the circuit breaker, confirming everyone's fears, and starts again the next day.
It makes it worse when they say they are propping up the market, if the market is at a relative peak and daddy warbucks shows up saying he'll buy anything no matter the cost, of course everyone is going to get out while the getting is good.
tyre|10 years ago
If you think you _may_ want to sell at all tomorrow but also think a circuit breaker could trigger, you're going to sell first thing in the morning. So will everyone else.
The circuit breaker can actually trigger a worse panic as investors all try to squeeze in sell orders at once. This triggers the circuit breaker, confirming everyone's fears, and starts again the next day.
fleitz|10 years ago