What Is Trade Resumption?
Trade resumption usually refers to the commencement of trading activities after they have been shut down or halted for some period of time, but may also refer to the resumption of trade between nations.
- Trade resumption is the commencement of trading activities after they have been shut down for a period of time or the resumption of trade between nations.
- Trade resumption occurs after events, such as a pending news announcement, an order imbalance, or other regulatory reasons, cause a trading halt.
- FINRA notes that a trade resumption "does not mean that the SEC’s concerns have been addressed and no longer apply. Investors need to be careful before purchasing a stock after an SEC trading suspension has ended."
Understanding Trade Resumption
Trade resumption is a term used to signal the resumption of open-market trading in a security such as a common stock or even an entire exchange. Trade resumption occurs after situations when security trading is halted due to material information that needs time to disseminate, or fundamental questions that have been raised about the reliability of previously released information. Often, a trading halt occurs because of the anticipation of a news announcement, to correct an order imbalance, or for other regulatory reasons.
According to the Financial Industry Regulatory Authority (FINRA), when a trading halt is put into place, the listing exchange alerts the market that trading is suspended for that particular stock, and other markets trading in it also have to comply with the halt. While it's in effect, brokers are prohibited from trading the stock and from publishing quotations and indications of interest.
Once the suspension ends, trade resumption occurs. However, as FINRA explains: "the end of a trading suspension does not mean that quoting and trading automatically start again for OTC stocks. Instead, certain requirements in SEC Rule 15c2-11 must be met."
A broker must also file a form with FINRA that needs to be approved before quoting can resume. According to FINRA:
"The broker can file the form after it obtains and reviews current information about the company, including: the company’s organization, operations and certain control affiliates; the title and class of securities outstanding and being traded; and the company’s most recent balance sheet and profit and loss and retained earnings statement."
"The broker filing the form must have a reasonable basis for believing the information is accurate and that it comes from reliable sources. A broker generally cannot quote the stock or solicit or recommend the stock to any investor until the form is approved. After approval, the broker can begin quoting—and other brokers may also quote the stock relying, or 'piggybacking,' on the first broker’s quote without filing the form or reviewing the company information on their own."
FINRA notes that the SEC has a limited ability to continue suspensions, so a trade resumption "does not mean that the SEC’s concerns have been addressed and no longer apply. Investors need to be careful before purchasing a stock after an SEC trading suspension has ended."