What is a Trading Curb?
Trading curbs are restrictions that are placed on a given security or a market for a specified period of time. Sometimes known as a collar or circuit breaker, this temporary restriction in trading is usually invoked when there is a need to halt or curb a dramatic drop in the value of the security or securities concerned. From this perspective, the use of a trading curb can be viewed as a means of providing a cooling down period for the market to re-stabilize. The method of implementing a trading curb may occur in one of two different ways. First, the curb could invoke a temporary halt to all trading in the market for a short period of time. During this period, no securities of any type can be purchased or sold. The second approach calls for the temporary suspension of trading on specific securities, while other securities that meet the so-called tick test may be traded on an uptick. Whether the trading curb is an across the board halt of trading or involves a specified number of securi
Trading curbs are planned closures of the Exchanges whenever an unusually large rise or fall in the major averages occurs. The amounts of rises or falls that trigger a curb change from time to time, depending on the Exchanges’ experience with their use. Trading curbs are gradually phased in so that a an initial curb may stop program selling, while an ultimate curb – triggered when there is a massive sell-off – will shut the market down completely. Curbs on the upside in theory prevent runaway markets, and on the downside prevent crashes. 2. What do is the bid and ask (offer)? The current bid is the highest price at which the dealer will buy, and the current ask (offer) is the lowest price at which the dealer will sell. The difference between the two is the spread. The entity posting the bid or ask may be a market maker, specialist or market participant in an ECN. 3. What do long and short mean? Long a stock means you own it. Short a stock means you borrow it from your broker and sell i
