It probably doesn't make sense for an individual actor to stop trading when all the assets it holds are tanking. Everyone's selling to cut their short-term losses. Crashes aren't always feedback loops.

No one would self-impose the limit on themselves, because you could profit if you trade while everyone else isn't trading.

You do not want to trust your market's health to some random trading firm's coding skills and goodwill, just like you wouldn't open up a public webservice without some basic rate-limiting.

You'd hope so, but why not have protection on the other end as well?