Trading Halt

What is a trading halt?

A trading halt is a temporary suspension of trading in a particular security (or securities) at one exchange or across multiple exchanges. Halts are used to manage significant news events, correct order imbalances, address technical problems, or respond to rapid price moves that could undermine fair and orderly markets.

Why halts are used

• To allow investors time to absorb and react to material news (e.g., corporate announcements, regulatory or legal developments, major management changes).
• To prevent unfair advantage by those who receive news early, ensuring equal access to price-moving information.
• To restore balance when buy and sell orders are severely mismatched, especially at the open.
• To protect markets during extreme volatility or systemic stress.

How trading halts work

• Regulatory halts: Initiated by an exchange (and recognized across U.S. exchanges) or by the SEC when there are doubts about a security’s compliance, missing disclosures, or other investor-protection concerns. The SEC may suspend trading in a stock for up to 10 days if continued trading would put the public at risk (commonly used when companies fail to file required reports).
• Non-regulatory halts: Exchanges may pause trading briefly to correct order imbalances or technical issues (often just a few minutes). For example, exchanges may institute an opening delay when after-hours news creates large pre-market order imbalances.
• During a halt, open orders may be canceled; options on halted securities may still be exercised under certain rules.

Market-wide circuit breakers

Market-wide circuit breakers pause trading across the entire U.S. stock market to curb panic selling and maintain stability. They are tied to percentage declines in the S&P 500 relative to the prior day’s close:
* 7% decline → 15-minute halt if triggered before 3:25 p.m. ET.
* 13% decline → 15-minute halt if triggered before 3:25 p.m. ET.
* 20% decline → trading halted for the remainder of the day, regardless of time.

Stock-specific circuit rules

In addition to market-wide breakers, rules address sudden, extreme moves in individual securities (Limit Up–Limit Down framework):
* For stocks priced above $3 that are in the S&P 500 or Russell 1000 (and certain exchange-traded products), a sudden move exceeding 5%—and lasting more than 15 seconds relative to the recent average price—can trigger a five-minute pause.
* For other stocks above $3, the threshold is a 10% sudden move.
* Stocks priced between $0.75 and $3 are halted after a sudden gain or loss of 20% or more.

What happens during and after a halt

• Trading is suspended while exchanges assess news, rebalance orders, or fix technical issues.
• Exchanges may publish updates and open an order imbalancing period before reopening to help re-establish a fair market price.
• When trading resumes, the market may open with an auction or other mechanisms designed to match supply and demand.

Key takeaways

• Trading halts temporarily stop trading to protect investors and preserve orderly markets.
• Halts can be regulatory (news, compliance, SEC action) or non-regulatory (order imbalances, technical problems).
• Market-wide circuit breakers and stock-specific rules exist to limit extreme volatility.
• The SEC can suspend trading for up to 10 days in cases that threaten public investors, such as delinquent public filings.

Sources

• U.S. Securities and Exchange Commission — Trading Suspensions; Fast Answers: Trading Halts and Delays; Investor Bulletins
• FINRA — When Trading Stops: Halts, Suspensions and Other Interruptions
• Investor.gov — Stock Market Circuit Breakers
• Limit Up Limit Down — Overview