A trading curb (also known as a circuit breaker in Wall Street parlance) is a financial regulatory instrument that the relevant stock exchange organization implements to prevent stock market crashes. Since their inception, circuit breakers have been modified to prevent both speculative gains and dramatic losses within a small time frame. When triggered, circuit breakers either stop trading for a small amount of time or close trading early to allow accurate information to flow among market makers and for institutional traders to assess their positions and make rational decisions.

On the New York Stock Exchange (NYSE), one type of trading curb is referred to as a "circuit breaker". These limits were put in place beginning in January 1988 (weeks after Black Monday occurred in 1987) in order to reduce market volatility and massive panic sell-offs, giving traders time to reconsider their transactions. The regulatory filing that makes circuit breakers mandatory on United States stock exchanges is Securities and Exchange Commission Rule 80B, which lays out the specifics of circuit breakers and price limits.

The most recently updated amendment of rule 80B went into effect on April 8, 2013, and has three tiers of thresholds that have different protocols for halting trading and closing the markets.

At the start of each day, the NYSE sets three circuit breaker levels: Level 1 is 7%, Level 2 is 13%, and Level 3 is 20%. These thresholds are percentage drops in the S&P 500 Index, relative to the value at the close of the preceding trading day. Level 1 and 2 declines each cause at least a 15-minute halt in trading (unless they occur after 3:25 pm, in which case no halt occurs). A maximum of one halt per level can occur each day. A Level 3 decline will halt trading for the remainder of the day.

Following the stock market crash on October 19, 1987, the United States President Ronald Reagan assembled a Task Force on Market Mechanisms, known as the Brady Commission, to investigate the causes of the crash. The Brady Commission's report had four main findings, one of which stated that whatever regulatory agency was chosen to monitor equity markets should be responsible for designing and implementing price limit systems known as circuit breakers.

The original intent of circuit breakers was not to prevent dramatic but fair price swings, rather to allow time for sufficient communication between traders and specialists. In the days leading up to the crash, price swings were dramatic but not crisis-like. However, on Black Monday the crash was caused by lack of information flow through the markets among other discrepancies such as lack of uniform margin trading rules across different markets.

On October 27, 1997, under the trading curb rules then in effect, trading at the New York Stock Exchange was halted early after the Dow Jones Industrial Average declined by 550 points. This was the first time US stock markets had closed early due to trading curbs.

Since 1997, circuit breakers have evolved from a Dow Jones Industrial Average points-based system into a percentage change system that tracks the S&P 500.

Then-SEC Chairman Arthur Levitt Jr. believes this use was unnecessary, and that market price levels had increased so much since circuit breakers were implemented that the point based system triggered a halt for a decline that was not considered a crisis. Some, like Robert R. Glauber, suggested in the aftermath of the circuit breaker tripping that trigger points be increased, and automatically reset by formula on an annual basis.

The NYSE formerly implemented a curb on program trading under certain conditions. A program trade is defined by the NYSE as a basket of stocks from the S&P 500 where there are at least 15 stocks or where the value of the basket is at least $1 million. Such trades are generally automated.

When activated, the curbs restricted program trades to sell on upticks and buy only on downticks.

The trading curbs would become activated whenever the NYSE Composite Index moved 190 points or the Dow Jones Industrial Average moved 2% from its previous close. They remained in place for the rest of the trading day or until the NYSE Composite Index moved to within 90 points or the Dow moved within 1% of the previous close.