Trading Halt

In the US stock exchange, a trading halt is the term for when trading stops during a specific period of time for a specific security. As a general rule, this period is only about an hour, although this is not technically a limit. Longer trading halts have occurred from time to time. The difference between a trading halt and a trading delay is that the former occurs during the day or intraday, whereas a trading delay happens at the start of the day and delays the stock’s opening.

A trading halt typically occurs when a publicly traded company intends to release news about its operations. This halt permits the average investor to review the news at hand and determine how it affects them. A trading halt may occur for other reasons as well, such as if the market’s listing standards have proven too difficult for a security to meet. In this case a trading halt may occur in order to determine whether the security should still trade.

The examples discussed above are what are known as regulatory trading halts, as these are the types that happen on a major stock exchange. It should be noted that when a stock exchange in the United States such as the American Stock Exchange or the New York Stock Exchange halts the trading of a stock, other US stock exchanges also honor this trading halt.

Another type of halt, a non regulatory trading halt, can also occur under certain circumstances. Non regulatory trading halts happen because there is too much of an imbalance between the buyers of a security and its sellers. It is crucial to note that not all of the exchanges practice non regulatory halts, the NASDAQ being the most prominent exchange not to do so. If a non regulatory halt occurs in regard to a stock,  other exchanges may choose not to honor the halt. Before this type of halt can be lifted, certain market specialists must get together to decide on the correct price range for the stock in question.

A trading halt is not to be confused with a trading suspension. When the Securities and Exchange Commission (SEC) ceases all trade of a particular security because it has significant concerns regarding a company, it is a trading suspension.  As a regulatory body the SEC does have the power to cease trading of a particular security. The SEC lists the trading suspensions it has invoked since 1995 on its website.