Temporary Restriction on Program Trading

C

The correct answer is C. Trading curb.

A trading curb, also known as a circuit breaker, is a temporary restriction on program trading in a particular security or market, usually to reduce dramatic price movements. The purpose of trading curbs is to prevent extreme volatility in financial markets and to prevent panic selling or buying. Trading curbs are triggered automatically when the market experiences a sharp decline or a rapid increase in price, usually as a result of program trading.

Program trading refers to the use of computer algorithms to buy or sell a large number of securities at once. Program trading can increase market volatility because it can trigger a large number of buy or sell orders simultaneously, causing prices to move rapidly in one direction. Trading curbs are designed to slow down the pace of trading and give investors time to adjust their positions.

The NYSE and other major exchanges have implemented trading curbs to prevent market crashes and to maintain orderly trading. The NYSE trading curb is triggered by a decline of a specific number of points in the Dow Jones Industrial Average (DJIA), which serves as an indicator of the overall market performance. When the DJIA declines by a certain number of points within a specified period, trading is halted for a set period of time. The length of the halt varies depending on the severity of the decline.

In summary, trading curbs are temporary restrictions on program trading in a particular security or market, designed to prevent extreme volatility and panic selling or buying. The NYSE and other major exchanges have implemented trading curbs to maintain orderly trading and prevent market crashes.