What Is a Trading Halt?
Let me explain what a trading halt really is—it's a temporary suspension of trading for a specific security or securities, either at one exchange or across multiple ones. You might see this happen in anticipation of a big news announcement, to fix an order imbalance, due to a technical glitch, for regulatory reasons, or when the price of a security or an index moves so fast that it triggers exchange rules. While the halt is on, open orders can be canceled, and options might still be exercised.
Keep in mind, this is different from a trading suspension ordered by the Securities and Exchange Commission (SEC). Under U.S. securities law, the SEC can suspend public trading in any stock for up to 10 days to protect investors and the public interest.
Key Takeaways
Here's what you need to know: a trading halt is a short stop in trading for a particular security or securities at one exchange or across several. These halts are usually put in place before a news announcement, to correct an order imbalance, or because of a large, sudden change in the share price. Also, market-wide halts can kick in due to severe intraday drops in the S&P 500 index, following what's known as circuit breaker rules.
How a Trading Halt Works
You should understand that a trading halt can be regulatory or non-regulatory. Regulatory halts come into play when there's doubt about whether the security still meets listing standards, giving market participants time to assess important news—like a U.S. Food and Drug Administration decision on a new drug application, for instance.
The point of a trading halt is to ensure everyone has wide access to news that could move the price, preventing those who get it first from profiting over others who are late. Other developments that might trigger a regulatory halt include corporate acquisitions, restructurings, regulatory or legal decisions, or changes in management.
If a regulatory trading halt is issued by the primary U.S. exchange for a security, other U.S. exchanges will honor it. On the other hand, a non-regulatory trading halt can happen on the New York Stock Exchange (NYSE)—but not on the Nasdaq—to fix a large imbalance between buy and sell orders. These typically last just a few minutes until balance is restored, and trading resumes.
Companies often hold off on releasing sensitive information until after the market closes, so investors have time to evaluate it and decide if it's significant. But this can create a big imbalance in buy and sell orders before the market opens. In that case, an exchange might delay the opening or impose a trading halt right at the start. These delays usually last only a few minutes while the order balance is restored.
Under federal U.S. securities law, the SEC has the authority to suspend trading in any publicly traded stock for up to 10 days. They'll do this if they believe continued trading puts the investing public at risk, often when a company hasn't filed required periodic reports like quarterly or annual financial statements.
Circuit Breaker Trading Halts
U.S. securities exchanges have rules for market-wide trading halts when dramatic price declines threaten market liquidity. If the S&P 500 index drops 7% or 13% from the previous day's closing level before 3:25 p.m. ET, it triggers a 15-minute halt across the market. A 20% decline stops trading for the rest of the day, no matter the time.
Circuit breakers also apply to individual stocks under U.S. rules. For stocks priced above $3 in the S&P 500 or Russell 1000 indices, plus certain ETFs, trading halts for five minutes after a sudden move of more than 5%—up or down—lasting over 15 seconds from the average price over the prior five minutes. For other stocks above $3, it's a 10% move, and for those between $0.75 and $3, a 20% gain or loss triggers the halt.
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