GIPHY / istock / getty

What Is a Stock Halt?

A stock halt is when a stock exchange, the SEC or a brokerage stops trading a particular security or securities. Automatic halts, or circuit breaker halts, are the most common, with multiple halts occurring daily. 

Stock halts, explained

A stock halt, or trading halt, is a temporary pause in trading activity for a security, set of securities, or the broader market. Stock halts are common occurrences, often initiated by exchanges like the NYSE or Nasdaq, to help regulate volatile markets. 

Types of trading halts

There are two basic types of trading halts: regulatory and non-regulatory. 

Exchanges use regulatory halts to ensure investors have time to access new data, or to investigate whether a security meets listing standards. Regulatory halts may be triggered by:

  • Corporate merger or acquisition announcements
  • Crucial changes to a company’s structure or finances
  • The release of new substantially material information about a firm
  • Impending regulatory or legal decisions about a firm or industry

By contrast, non-regulatory halts exist to correct imbalances between buy and sell orders. (For example, if a premarket quarterly report floods the market with buy orders.) Technical glitches can also spark non-regulatory halts. 

Circuit breaker trading halts

Circuit breaking trading halts occur when assets or major indices experience substantial price action that triggers a “circuit breaker.” These halts follow each exchange’s standing rules to ensure fairness. It gives the company time to provide further clarification on what is causing the stock to move so much, to ensure the price isn’t moving based on insider knowledge. 

SEC suspensions

The Securities and Exchange Commission (SEC) may suspend trading when it suspects harm to investors based on fraud, market manipulation or missing or incomplete regulatory filings. SEC suspensions may last up to 10 days. 

Brokerage trading halts

Brokerages may also suspend trading on claims they can’t meet their clearinghouse obligations. This may happen when volatility produces more buy orders than sell orders. However, brokerage-initiated trading halts reside in a legal grey zone and may result in lawsuits or allegations of market manipulation. 

How long does a stock halt last?

Stock halts can last minutes, hours, days or months depending on the purpose. Generally, non-regulatory halts last a few minutes, while regulatory and SEC halts may take longer to resolve. 

Famous stock halts in history

Exchanges often temporarily suspend trading to curb panic, exuberance and illicit goings-on. But a few famous halts stand out in the last 150 years, including:

  • A one-week halt following Abraham Lincoln’s assassination
  • The NYSE’s four-month stock halt during WWI (ostensibly to prevent foreign investors from selling domestic assets to fund the war)
  • The market-wide circuit breaker halt of 17 October 1997, triggered when the Dow plunged 550 points
  • A one-week stock halt following the tragedy of 9/11
  • A market-wide halt on 1 December 2008 to prevent a major sell-off

How do stock halts affect you?

Stock halts exist to prevent fraud, reduce arbitrage and even the odds for investors. Still, it’s difficult to know why a stock halt has happened until after the fact – or rein in your emotions when the market falls into a tizzy. 

But just because a stock halt happens doesn’t mean you should panic. In fact, it’s the ultimate time not to panic; whether your portfolio’s value rises or falls is out of your hands. Often, the best tactic is to wait out the volatility and face tomorrow bright-eyed and fully invested. 

What this means for you

Stock halts offer a chance to view your positions (and emotions) in a new light. When you hit a trading halt, remember to breathe and don’t make any rash decisions. 

And if you decide you’d prefer a capable investing AI to handle the market’s ups and downs for you…well, we certainly won’t object.

Disclosures

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

Hands-free approach to investing

Our AI manages your money with commission-free, institutional-grade, AI-powered investment kits.