A trading halt is a temporary suspension of trading in a listed security or for an entire market. Trading halts are implemented to allow companies to announce important news, when there is a significant disparity between buyers and sellers, or due to large price movements.
Definition and Examples of Trading Halts
Trading halts temporarily prevent trading in the security or market to which they are applied. There are regulatory and non-regulatory trading halts.
How Does a Trading Halt Work?
The goal of stock exchanges is to provide a market for securities where buyers and sellers can obtain fair and efficient prices. In order to ensure this, they have regulatory authorities including the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), as well as the exchanges themselves, rules designed to limit extreme volatility and correct imbalances in supply and demand. Trading halts are one of the ways to achieve these goals.
Types of Trading Halts
Trading halts can be imposed on individual stocks or on the entire market. In addition to doing this due to the expectation of important news being released, they can be imposed due to price movement. Trading halts resulting from price movement are called “market breakers.”
What Does This Mean for Individual Investors?
If you own a security, it is possible that a trading halt will be triggered and you will not be able to sell the security until trading resumes. You may also not be able to buy the security you wish to purchase if a halt has been imposed on trading. While a trading halt can be inconvenient, its purpose is to stabilize the market and reduce panic.
Source: https://www.thebalancemoney.com/what-is-a-trading-halt-5188257
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