What is a 'Trading Halt'

A trading halt is a temporary suspension in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. A trading halt may also be imposed for regulatory reasons. During a trading halt, open orders may be canceled and options may be exercised.

BREAKING DOWN 'Trading Halt'

A trading halt provides all investors with an equal opportunity to evaluate news and make buy, sell, or hold decisions. Stock exchanges may halt a stock at any given time if it suspects unusual activity related to a stock’s price – such as unsubstantiated rumors. The stock will typically resume trading after 30 minutes, once news from the issuing company has been disseminated. When a halt is imposed by a security’s primary exchange, the other U.S. markets honor the halt.

Trading delays are simply trading halts that occur at the beginning of the trading day. Traders can find trading halt and delay information on an exchange’s website.

Common Trading Halts

The Securities and Exchange Commission (SEC) highlights two types of trading halts and delays that may impact investors. While the SEC cannot halt trading, they may suspend trading for up to 10 days and, if needed, revoke the security’s registration.

The two types of trading halts and delays include:

  • Regulatory Halts – Regulatory halts occur when a company has pending news that may affect the security’s price. By halting or delaying trading, everyone has time to assess the impact of the news. These halts may also occur in cases when a security may not continue to meet an exchange’s listing standards.
  • Non-Regulatory Halts – Non-regulatory halts occur when there is a significant imbalance in pending buy and sell orders in a security. Exchange specialists typically respond by disseminating information to investors concerning a price range where trading may begin again on the exchange. Notably, non-regulatory halts are not shared across exchanges, so the security may continue to trade.

Exchange Circuit Breakers

Stock exchanges can take measures to ease panic selling by invoking Rule 48 and halting trading. 

Under the 2012 rules, market-wide circuit breakers kick in when the S&P 500 index drops 7% (Level 1), 13% (Level 2), and 20% (Level 3) from the prior day’s close. A market decline that triggers are Level 1 or 2 circuit breaker before 3:25 p.m. Eastern Time will halt trading for 15 minutes, but will not halt trading at or after 3:25 p.m.

The Bottom Line

Trading halts are a temporary suspension in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. Exchanges may also invoke Rule 48 to halt trading due to excessive volatility during a time of crisis in order to ensure that the market operates in an orderly fashion.

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