View Full Version : curbs in

07-19-2002, 04:31 PM
What exactly are curbs? Some kind of buffer to combat volatility?

I've got a semi-decent chunk in an IRA money market account. I'm waiting for that magic moment when I feel that the market is bottoming out. The sell off from 9-11 didn't feel right to me, and now here we are below 8,000. What's the feeling out there? How low can we go?

07-19-2002, 04:45 PM
Suppose an NYSE stock is trading last at 20, by 20 1/8. And, all of a sudden all these new sell orders come in, and we realize the equilibrium price is 15. The NYSE Specialist is not allowed to sell at 19 7/8, unless it is an uptick. Moreover, he is supposed to buy at at least one of the downticks between 20 and 15, if nobody else does.

So, when people are doing arbitrage strategies, they absolutely want to hit the bid, and sweep all the bids above 15. So, what they decided, was that they'd introduce this "sidecar" thing, where these rapid orders are stuck in a "separate folder" for five minutes. This gives all the NYSE floor traders time to front-run them, and the Specialist a chance to make money, too.

Now, supposedly they got rid of sidecar, but they still have "curbs." I guess this just means that orders to sell like 10,000 shares of 10 different stocks at once lose priority over other orders, somehow. You must have to delay them or break them up, while the NYSE guys front-run them. I was curious about this myself, but could not find it on the NYSE web site, and my old NYSE rule book is obsolete.

So far as I can detect, none of the arbitrage bands are effected the slightest bit by these curbs. Meaning, prices are moving just as if there were no curbs, but perhaps different people are making money. More later, and more, hopefully, from someone else!