Limit Moves and Circuit Breakers in Futures Markets

A limit move happens when a futures contract reaches the maximum price change its exchange allows in one session, after which trading beyond that price is blocked or paused. Circuit breakers are the broader family of rules that halt or slow trading in extreme moves, including the US stock market’s 7%, 13% and 20% market-wide halts, which CME’s equity index futures are coordinated with.

In short: Agricultural futures such as corn have hard daily price limits that are reset twice a year and expand after a limit day. US equity index futures, such as the E-mini S&P 500, have 7% limits up and down outside US stock market hours, and during the day are coordinated with the NYSE’s market-wide circuit breakers, which halt stock trading for 15 minutes at a 7% or 13% fall in the S&P 500 before 3:25 p.m. Eastern and for the rest of the day at 20%. Crude oil and many other energy contracts rely mainly on dynamic circuit breakers, brief pauses that slow trading without capping the day’s move. In March 2020, the stock market’s Level 1 circuit breaker fired four times, and E-mini futures hit their overnight limit-down several times.

Why limits exist

Price limits and halts are meant to give markets time to absorb shocking news, let participants meet margin calls, and stop a cascade of forced selling feeding on itself. The trade-off is that while a market is locked, traders who need to exit cannot. Limits do not remove losses; they can postpone them.

Daily price limits: the agricultural model

Many grain and livestock contracts have hard daily limits: trading is not allowed above the prior settlement plus the limit or below the prior settlement minus the limit.

For CBOT corn, CME’s rules set the limit by formula and reset it every six months. Under Rule 10102.D, CME collects settlement prices for a reference contract over 45 trading days, averages them, and multiplies by 7%; the result, rounded to the nearest 5 cents and with a floor of 20 cents per bushel, becomes the initial limit from the first trading day of May through October. A second reset applies from November through April. After a contract month settles at the limit, limits expand to a wider “expanded limit” (historically 50% wider) for the following day, and stay expanded until all months settle within the initial limit. Since a 2023 amendment, two consecutive days of settlements at the expanded limit reset both limits higher. CME publishes the current values in its semi-annual price limit notices; check them rather than relying on any number here.

What “limit locked” means

If a contract is bid at limit up (or offered at limit down) and no one will trade on the other side, the market is locked. Orders queue at the limit price, but few or none get filled. Contract specifications, including limits, are explained in futures contract specifications.

Worked example: two limit-down days in corn

Real spec: CBOT corn is 5,000 bushels per contract; a 1-cent move is $50. The limit values here are illustrative.

A trader is long 2 corn contracts. The initial daily limit is 30 cents, expanding to 45 cents after a limit settlement.

Day	Limit	Move	Loss per contract	Loss on 2 contracts	Could the trader exit?
1	30 cents	-30 cents (settles limit down)	$1,500	$3,000	Only if a buyer appeared at the limit
2	45 cents (expanded)	-45 cents (settles limit down)	$2,250	$4,500	Same
Total		-75 cents	$3,750	$7,500

Check: 30 cents x 5,000 = $1,500; 45 cents x 5,000 = $2,250. Both days’ losses are collected as variation margin even though the trader could not close the position. A stop order placed at, say, 20 cents below the prior day’s close would not have helped; it would simply have joined the queue at the limit.

Equity index futures and the stock market circuit breakers

The market-wide circuit breakers (NYSE Rule 7.12)

US stock exchanges use three thresholds, measured as a fall in the S&P 500 from the prior day’s close. As described in the Market-Wide Circuit Breaker Working Group’s report filed with the SEC:

Level	S&P 500 decline	Effect if before 3:25 p.m. ET	Effect at or after 3:25 p.m. ET
Level 1	7%	15-minute market-wide halt	No halt
Level 2	13%	15-minute market-wide halt	No halt
Level 3	20%	Halt for the rest of the day	Halt for the rest of the day

Level 1 and Level 2 can each be triggered only once per day.

How CME’s equity futures limits fit in

CME’s rule for S&P 500 futures (Rule 35102.I, mirrored for the E-mini) sets limits at 7%, 13% and 20% from a reference price. In Central Time:

From the 5:00 p.m. open to 8:15 a.m.: trading cannot go more than 7% above or below the reference price. These are hard limits up and down, also subject to dynamic circuit breakers.
From 8:30 a.m. to 2:25 p.m.: the downside 7% limit applies until the NYSE declares a Level 1 halt, at which point futures halt too and resume 10 minutes after the stock market halt began, now subject to the 13% limit. The same happens at Level 2, after which the 20% limit applies. A Level 3 halt stops futures for the rest of the session.
From 2:25 p.m. to 3:00 p.m.: only the 20% limit applies.
From 3:00 p.m. to the 4:00 p.m. close: 7% up and down, but never below the 20% limit.

Before October 2020, the overnight limit was 5%. CME expanded it to 7% (with a 3.5% dynamic circuit breaker) effective for the trade date of October 12, 2020. More on these products is in stock index futures explained.

March 2020: the circuit breakers in action

The working group’s report gives a timeline of the four days when the Level 1 circuit breaker fired, the first market-wide halts since 1997:

Date (2020)	What happened
Sunday, March 8, overnight	E-mini S&P 500 futures hit their limit-down (then 5%) as oil collapsed and COVID-19 news worsened
Monday, March 9	S&P 500 crossed -7% at 9:34:13 a.m. ET; 15-minute halt; closed down 7.6%
Thursday, March 12	E-mini again limit-down overnight; S&P 500 crossed -7% at 9:35:44 a.m.; closed down 9.5%
Monday, March 16	E-mini limit-down overnight; S&P 500 crossed -7% at 9:30:01 a.m., one second after the open
Wednesday, March 18	S&P 500 crossed -7% at 12:56:17 p.m.; reopened at 1:11:17 p.m.; closed down 5.2%

The working group concluded that the mechanism “worked as intended” and that the halts “appear to have had the intended effect of calming volatility in the market, without causing harm.” It recommended making the rules permanent.

For futures traders, the overnight limit-down episodes are the key detail: from Sunday evening until the US stock open, sellers could not trade below the limit. Anyone with a stop below that level had to wait.

Energy futures: dynamic circuit breakers instead of hard limits

Crude oil futures on NYMEX use dynamic circuit breakers: if prices move too far within a short look-back window, trading pauses briefly, then resumes. These pauses slow a move but do not cap it.

April 20, 2020 showed what that means. The CFTC staff report found that “over 30 DCBs were triggered in the May Contract and more than 10 DCBs were triggered in the May-June Spread contract.” The May contract still fell from zero to -$40.32 in about 20 minutes. Before prices went negative, CME told members that WTI “would have no low limits and could trade negative.” The full story is in negative oil prices in April 2020.

Exchanges also use price banding (rejecting orders too far from the current price) and velocity logic (pausing when prices move “too far, too fast”), which the CFTC report describes alongside the circuit breakers.

Canada

The Montreal Exchange sets its own rules on price limits and trading halts for its products, including S&P/TSX 60 index futures (SXF), and Canadian stock trading is subject to its own circuit breaker policies under CIRO’s rules. The details differ from the US rules described above, so check the Montreal Exchange rule book and contract specifications for the product you are looking at.

What can go wrong

You cannot exit a locked market. Your loss keeps accruing through daily settlement while you wait.
Stops do not help at the limit. They join the queue.
Limits expand. After a limit day, the next day’s possible move is larger.
Halts end. When trading resumes, prices can gap to a new level immediately.
Not every market has a hard limit. Energy and many financial contracts can move much further in a day, with only brief pauses.
Related markets keep trading. Options, ETFs, or other venues may keep moving while the futures are locked, which can produce confusing prices.

The short version

Price limits cap how far some futures, such as corn, can move in a day, with limits reset twice a year and widened after a limit day. US equity index futures have 7% limits outside stock market hours and, during the day, halt alongside the NYSE’s 7%, 13% and 20% market-wide circuit breakers. Crude oil relies on brief dynamic pauses instead of hard limits, which is why it could fall below zero in April 2020. In March 2020 the stock market halted four times and E-mini futures repeatedly hit their overnight limit-down. Limits slow markets down, but they do not stop losses, and they can stop you from getting out.