Macro event liquidity circuit breaker checklist

If you need to think about liquidity during the first print, the circuit is already too late.

Define three explicit no-trade states for the instrument you plan to touch:

Treat these as trading stop states, not caution notes.

If any state hits, your first action is either `pause`, `re-size`, or `flatten`, in that priority order.

• **Spread break state**: spread widens beyond your pre-defined maximum shock
• **Depth failure state**: available size at target chain stays below your minimum executable size
• **Refill delay state**: repeated bid-offer changes fail to normalize within a defined recovery window

Don't use a single ratio. Use a weighted index with thresholds.

Track:

Use a simple formula for each event chain:

• point-in-time spread
• ten-level liquidity score
• order-to-fill success at your target size
• depth change rate over the last 15 seconds
• if spread is above threshold, subtract risk score
• if depth drops sharply, subtract more
• if refill rate slows, subtract even more
• if score < 30, the breaker is active and new entries are blocked

Circuit logic must be explicit for each trade shape.

### For directional singles

### For spreads and ratios

### For short option carrying risk

• set max spread shock
• define minimum first-fill size
• add one fallback leg reduction level
• verify both legs pass spread/depth checks
• apply the tighter spread cap across the pair
• if one leg fails, block both legs until liquidity recovers
• include assignment pressure in breaker checks
• use a wider spread buffer for the hedge leg
• force immediate re-hedge check once circuit opens

When breaker is active, do not stay passive forever. Run a fixed loop:

1. stop new entries 2. update spread and depth every 30 seconds 3. tighten position only if spread recovers and depth is restoring 4. close one layer of risk when two cycles pass without relief

The goal is not to re-enter quickly. The goal is to prevent hidden slippage from growing while conditions are still broken.

Circuit break is closed only after all are true:

If any rule is not true, keep protective posture and continue with reduced exposure.

• spread has returned inside pre-event operating limits
• ten-level depth is recoverable for the planned size
• order refill speed is stable again
• risk plan confirms the thesis still has enough execution headroom

Every macro week, one minute of post-event review is usually enough.

Record:

This is how execution rules become team memory instead of heroics.

• where breaker should have triggered earlier
• whether priority actions were pause/reduce/close
• any false positive cases that reduced profit
• lessons that changed threshold values