Curbs In Explained: Market Trading Halts and Their Impact in 2025
Explore the concept of 'Curbs In' in stock market trading, how trading halts work, their history since 1987, and their role in stabilizing volatile markets.
Gordon Scott has been a dedicated investor and technical analyst for over 20 years and holds the Chartered Market Technician (CMT) designation.
What Does 'Curbs In' Mean in Trading?
"Curbs In" refers to a temporary market condition where trading restrictions are activated due to rapid price movements in one direction. This term signals that trading curbs—limitations or halts—are currently enforced on one or more securities exchanges. These curbs can apply to individual stocks, groups of securities, indexes, or even the entire market. When trading is paused under these conditions, it is called "curbs in." Once trading restrictions are lifted, the market is said to be "curbs out."
Key Points to Remember
- "Curbs In" indicates an active trading halt caused by swift market changes.
- Trading curbs serve as safeguards, limiting transactions on specific securities or the whole market to prevent extreme volatility.
- During "curbs in," trading is suspended; resumption of trading is termed "curbs out."
How Do 'Curbs In' Function?
"Curbs In" is synonymous with circuit breakers—automatic trading halts triggered when market prices fall sharply beyond preset thresholds. These mechanisms are designed to pause trading temporarily, allowing investors time to digest information and reduce panic selling. Curbs are widely implemented in global securities markets.
In the United States, the New York Stock Exchange (NYSE) established curb rules in 1987, formalized under SEC Rule 80B. This rule sets three levels of trading halts based on the S&P 500 Index's decline: 7%, 13%, and 20%. These levels activate sequentially to suspend trading and stabilize the market. Importantly, these curbs operate independently from futures markets, which have their own trading limits during overnight sessions.
Some market experts argue that curbs may inadvertently increase volatility by interrupting natural market momentum. They suggest that allowing continuous trading could lead to a more balanced market equilibrium.
The Origin and Evolution of Trading Curbs
The concept of trading curbs emerged after the infamous Black Monday crash on October 19, 1987, when global markets plummeted dramatically. The Dow Jones Industrial Average (DJIA) dropped 508 points, a staggering 22.61% decline. In response, President Ronald Reagan commissioned the Brady Commission to investigate the crash's causes and propose solutions.
The commission identified rapid market movements and poor communication among traders as key factors behind the crash. To address this, they introduced circuit breakers—mechanisms designed to temporarily halt trading during extreme market drops. The primary goal was to provide traders with time to communicate and reassess, rather than to prevent market swings outright.
Since then, various trading curbs have been implemented and adjusted over time, including program trading curbs used briefly in November 2007. These tools continue to play a critical role in managing market volatility in 2024.
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