Why haven't the markets been halted amid this drop? They haven't fallen enough

  • The Dow Jones industrial average plunged more than 500 points, but that's just 2 percent.
  • The first circuit breaker doesn't kick in until the S&P 500 drops 7 percent. It is down 1.8 percent Thursday afternoon.

The Dow Jones industrial average fell more than 500 points on Thursday afternoon — but that didn't trigger any trading halts.

That's because the stock market as measured by the S&P 500 index has to fall more to trigger those halts. The first such circuit breaker kicks in when the S&P 500 falls at least 7 percent, what's called level 1. The S&P was down 1.8 percent in afternoon trading on Thursday.

To put the day's move in a broader context, the point drop in the Dow (which is a basket of 30 large U.S. company stocks versus the 500 or so stocks in the S&P) was just 2.1 percent. The Dow fell 528 points on Thursday.

For the stock market to halt on Thursday, to allow fearful investors a chance to cool off, the S&P would have to drop to around 2,494, according to this notice from Nasdaq that is updated daily. And that kind of halt would last for 15 minutes.

The NYSE, Nasdaq and other exchanges put these circuit breakers in place after the October 1987 crash and a subsequent one in 1989.

The first level gets triggered if the S&P falls 7 percent between the opening of trading hours at 9:30 a.m. in New York and 3:25 p.m. (or 12:25 p.m. on days when the stock market has a scheduled early close).

The next trigger, level 2, kicks in when the index falls 13 percent, another 15-minute halt. To get there on Thursday, the S&P would have to fall to 2,333.

Level 1 and 2 halts can only happen once per trading day. If the S&P fell 20 percent (that would be to 2,145), trading would stop for the rest of the day.

That would be a "Black Monday"-sized drop, which happened on Oct. 19, 1987.

— CNBC's Liz Moyer contributed to this report.