Program
Trading Curbs
Whenever CNBC runs a banner
on your television screen that says CURBS
IN or
CURBS
IN, we receive a ton
of email from investors asking "What are curbs?" Here is the answer
for you:
Program
Trading "Circuit Breakers"
If the Dow Jones Industrial
Average falls 10%, trading is halted on the New York Stock Exchange
for 60 minutes. If the Dow Jones rallies 10%, there is no
restriction. Why? Because program buying and the accompany
rally is always perceived as "good".
If the Dow Jones Industrial
Average falls 20%, trading is halted on the New York Stock Exchange
for two hours. There is no trading halt if it rallies 20%,
as that would be perceived as "very very good".
If the Dow Jones Industrial
Average falls 30%, trading is halted on the New York Stock Exchange
for the day. There is no trading halt if it rallies 30%, as
that would be perceived as "the best thing that ever happened in the history
of the world".
According to the NYSE the
current 10, 20 and 30 percent decline levels, respectively, in the DJIA
will be as follows: A 1,350 point drop in the DJIA will halt trading
for one hour if the decline occurs before 2 p.m.; for 30 minutes if before
2:30 p.m.; and have no effect between 2:30 p.m. and 4 p.m.
A 2,700 point drop will halt trading for two hours if the decline occurs
before 1 p.m.; for one hour if before 2 p.m.; and for the remainder of
the day if between 2 p.m. and 4 p.m. A 4,000 point drop will
halt trading for the remainder of the day regardless of when the decline
occurs. Point levels are set quarterly by using the DJIA average
closing values of the previous month, rounded to the nearest 50 points.
The percentage levels are adjusted quarterly.
Program
Trading "Collars"
In the past, this was another
type of NYSE Trading Curb. It was eliminated on Friday, October 26, 2007.
Program
Trading "Sidecars"
In the past, this was another
type of NYSE Trading Curb. It was eliminated on Tuesday, February
16, 1999.
If you are trading based
on the program trading curb levels given above, or using any other indicator
mentioned on our site, please click here.