Curb the Curbs

The last week of stock market downside volatility is only made worse by the use of curbs by the stock exchange. As the market trades downward, the use of curbs only adds uncertainty to the mix, and keeps buyers away. Taking curbs out, and letting the market fall to a point where buyers will step in is what causes equilibrium in the markets.

For instance, let's say a curb is set to stop trading with a market decline of 250 points. What if a big buyer has a program trade in place to step in and buy securities if the market declines 275 points or more? What happens is....nothing. And with the added uncertainty, less liquidity due to curbs, etc. typically more sellers appear than buyers. This is not efficient, and increases the odds that more curbs and less liquidity will occur the next day-- this just exacerbates and slows down the process of reaching market equilibrium.

So I say "Curb the Curbs"!