Limit Locked

A market becomes limit-locked (also called locked-limit) when the price reaches or exceeds the limit defined for a given time period. These limits are put in place to provide circuit breakers in times of panic in an attempt to prevent meltdowns.

During Regular Trading Hours (RTH) the limits at which a market is locked are usually only set to the downside. Recently these limits have been set at 10%, 20% and 30% on exchanges such as the NYSE and the CME. During overnight trading these limits are usually tighter (5%) and apply in both directions.

The three different percent bands in the mentioned exchanges apply different halting rules to trading. The 30% rule, for example, is an absolute limit and ceases halting for the rest of the session if reached. The 10% rule halts trading for one-hour if the market drops by 10% before 2pm Eastern Time (ET). If the 10% drop happens between 2pm and 2:30pm then the halt is for a half-hour.

Most exchanges re-assess price limits at the end of each quarter and use the guiding percent figure to recalculate that actual point movement that can take place in an index or an index future.