Sure, it's just a ruleset that any exchange can follow to make themselves and bitcoin less of a target to the sorts of manipulations we are seeing right now.
If a then b. It could be implemented by any exchange to reduce the value of these attacks.
It wouldn't be anything more than that. If an exchange wants to adopt it, it would be up to them to do so and craft the particular implementation.
I may implement a free to use exchange in node.js or something as an example of how this would work, perhaps provide a RESTful trading API or something. Just for proof of concept purposes. I would probably base it on the mtgox websockets API and just extend that API to show how I think a circuit breaker should be done.
This discussion is more or less to help solidify what the ruleset should look like (if a then b). One thing is for certain, having bitcoin in a freefall due to mass panic does nothing to spur long term adoption of the currency and harms the confidence of the merchants and individuals that would like to use it for a day to day spending.
Now can you explain how moving the trade matching engine to an offline machine, does not do the same thing? If a trading engine was not access able directly thru the frontend as it is now, these attacks would also not cause any value harm. But again these rulesets would be going off more then once a day, Mt Gox and bitstamp two of the biggest exchanges, and the exchanges that would have to be the ones to apply them, get DDOS thru out the day, just like google and other huge companies. These rules would be going off and off all the time, so can explain how that would foster growth, and not hurt trading?
Instead of piggy backing off mtgox, setup a node exchange on the testnet, then randomly set off the exchange rulesets these would be the best way to show off the example.
Of course they would be going off several times a day. The point is that if the price takes a precipitous drop, there must be something wrong with the market. Things need to slow down and let cooler heads prevail. A bank run is never a good thing. There is no logical reason for the price to drop drastically other than active manipulation. This works by adjusting the market fundamentals to make a DDOS an unprofitable endeavor. If people can't panic sell, then the market has time to recover. Unless you're doing naked shorting of bitcoins, this should make absolute sense to you.
Also you missed my point about the API. You seem to think I'm hooking it to MtGox, that's not what I said. What I said is I would likely use the MtGox API (probably should have put the word API description) as a base and extend it. In otherwords, make a simple trading engine, probably in node.js. In that engine expose a trading API identical to what MtGox exposes, except add extensions to notify about this additional activity. It only makes sense if you realize that many people use the trading API to trade and thus software written to accept the MtGox API could easily be modified to accept an exchange using an identical but extended API.
As far as trade matching moving to an offline box, that has nothing to do with the principal of an exchange with a circuit breaker. That's just a method of dealing with a DDOS. It's a good idea on it's own, but sort of misses the whole point. A circuit breaker attempts to nullify the reward for a DDOS or any other attack, by keeping the price stable. It does so by restricting the number of southbound trades during the cooling off period. Even a sustained DDOS should have no effect on trading prices. If 1 bitcoin is averaging $100 then probably worth a hundred dollars regardless of if the exchange is pushed offline or not. The point is to watch for a precipitous drop in price and then halt trading and gradually restore it, giving the market time to recover.
I do admit that this could cause arbitrage opportunities to appear, but at least the price would remain stable enough one could conduct business.