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Trading Halt

Trading halt

A brief cessation of trading for a specific security or securities at one exchange or across several exchanges is known as a trading halt. The price of the security or an index may have changed sufficiently quickly to warrant a halt in accordance with exchange rules, or trading may have been suspended in anticipation of news announcements, to address an order imbalance, as a result of a technical issue, because of regulatory concerns, or for any other reason. Open orders may be cancelled, and options may still be exercised when a trading halt is in place.

Trading halts are distinct from a Securities and Exchange Commission-ordered trading suspension (SEC). 

Companies frequently hold off on disclosing sensitive information until after the market has closed so that investors have time to assess it and decide if it is important. However, this method can result in a significant imbalance between buy and sell orders prior to the market opening. In such a situation, an exchange may choose to implement an opening delay or a trading halt at the start of the market. These pauses often last no longer than a few minutes as the ratio of buy orders to sell orders is balanced again.

Both regulatory and non-regulatory trading halts are possible. Regulatory halts are imposed when there is uncertainty about whether the security still complies with listing requirements so that market participants have time to analyze significant news. A trade halt guarantees widespread access to news that may affect the price and prevents those who learn of it first from profiting from those who learn of it later. A regulatory trading halt may also be required in response to other significant occurrences, such as company mergers and acquisitions, legal or regulatory decisions, or management changes.

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