Curb Trading

What Is Curb Trading?

Curb trading occurs outside of general market operations or after the official exchanges have closed. As opposed to trading on official exchanges such as the New York Stock Exchange (NYSE) or the NASDAQ Stock Market.

The practice is also spelled sometimes as "kerb trading," and is reminiscent of the early days of open-outcry stock trading prior to the establishment of licensed stock exchanges where brokers and traders would gather outside by the curb of a street corner in downtown Manhattan.

Key Takeaways

  • Curb trading refers colloquially to orders that are executed outside of ordinary market hours.
  • The origins of curb trading trace back to curbstone brokers who were known to conduct trading on the actual curbs of streets in certain financial districts, such as in New York City.
  • Today, curb trading is commonly referred to as after-hours trading.

How Curb Trading Works

In the past, stocks that were considered unfit to trade on the New York Stock Exchange were bought and sold on the street curb. This led to the formation of the new American Stock Exchange (AMEX), so curb trading referred to any trades outside of NYSE exchange regulations. The American Stock Exchange was thus known as the Curb Exchange until 1921, when it formally organized into a legitimate exchange. The exchange went on pioneer listed index options and options on 25 broad-based and sector indices.

Today, curb trading is a catch-all phrase for any trading activity that occurs away from an organized exchange, be it a physical, electronic, centralized, or decentralized exchange. For those investors who truly believe, "money never sleeps," waiting for the next financial center to open for trading business does not meet their needs. The proliferation of digital communications and electronic networks now offers traders the ability to find other counterparties in dark pools and over-the-counter (OTC) markets nearly 24/7.

After-hours trading is one contemporary example, where after the market closes  investors can still buy and sell securities outside regular trading hours. Both the New York Stock Exchange (NYSE) and the Nasdaq normally operate between 9:30 a.m. and 4:00 p.m. Eastern Time. Trades during the after-hours session can be completed anytime between 4:00 p.m. and 8:00 p.m. Eastern Standard Time.

In these extended trading sessions, electronic communication networks (ECNs) match potential buyers and sellers without using a traditional stock exchange. The trading volume during the after-hours trading session tends to be fairly thin. That's because there are fewer active traders during this time period.

Origins of Curb Trading

The origins of curb trading trace back to curbstone brokers who were known to conduct trading on the actual curbs of streets in certain financial districts. These brokers were common during the 1800s and early 1900s, with the most famous curb market residing on Broad Street in Manhattan's financial district. Early curbstone brokers were known for dealing in speculative stocks, often in micro and small cap industrial companies benefiting from general trends in industrialization during that period.

It's not uncommon for curb trading to be synonymous with pink sheet stocks. As exchanges matured and eventually went electronic, the notion of curb trading isn't as prevalent.

The first stock licensed stock exchange in London was officially formed in 1773, a scant 19 years before the New York Stock Exchange. Whereas the London Stock Exchange (LSE) was handcuffed by the law restricting shares, the New York Stock Exchange has dealt in the trading of stocks, for better or worse, since its inception. The NYSE wasn't the first stock exchange in the U.S. however. That honor goes to the Philadelphia Stock Exchange, but the NYSE quickly became the most powerful.

Formed by brokers under the spreading boughs of a buttonwood tree, the New York Stock Exchange made its home on Wall Street, originally as a curb venue. The exchange's location, more than anything else, led to the dominance that the NYSE quickly attained. It was in the heart of all the business and trade coming to and going from the United States, as well as the domestic base for most banks and large corporations. By setting listing requirements and demanding fees, the New York Stock Exchange became a very wealthy institution.

Article Sources
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  1. New York Stock Exchange. "American Stock Exchange Historical Timeline," Page 2. Accessed July 27, 2021.

  2. New York Stock Exchange. "Holidays & Trading Hours." Accessed July 27, 2021.

  3. New York Stock Exchange. "History of the American Stock Exchange." Accessed July 27, 2021.

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