RT Journal Article
SR Electronic
T1 The Effect of Tripping the US Equity Market-Wide Circuit Breaker on Liquidity: Evidence from the Coronavirus Selloff
JF The Journal of Investing
FD Institutional Investor Journals
SP 21
OP 34
DO 10.3905/joi.2022.1.230
VO 32
IS 1
A1 Charles Favreau
A1 Ryan Garvey
YR 2022
UL https://pm-research.com/content/32/1/21.abstract
AB We examine changes in market liquidity around the triggering of US equity market-wide circuit breakers (MWCBs). The coronavirus pandemic has led to heightened market volatility and the tripping of four MWCBs in 2020. When the market reopens following an MWCB halt, trading demand (volume) surges. The rise in trading coincides with shifts in trading activity across exchanges and dark markets, and the cost of trading rises significantly. Although the market is less liquid immediately after a halt, conditions steadily improve over time and converge to similar levels on days in which the MWCB does not trip.