Trading Halt
A trading halt is a temporary suspension of trading in a security on a stock exchange. Trading halts are imposed by the exchange itself or by the Securities and Exchange Commission (SEC) in order to provide investors with time to better understand a security’s market activity. Trading halts are also used to prevent panic selling or to protect investors from potential manipulation.
History of Trading Halt
Trading halts have been used since the early days of the stock market. In the United States, the SEC has the authority to halt trading in any security for up to 10 trading days. The SEC can also suspend trading in a security for an indefinite period of time if it believes that the security is subject to manipulation or other fraudulent activities. The SEC can also halt trading in a security if it believes that the security is not suitable for trading due to a lack of information or other factors.
In recent years, trading halts have become more common due to the increased use of algorithmic trading and high-frequency trading. These types of trading can cause rapid price movements and can lead to market volatility. As a result, exchanges have implemented trading halts to protect investors from potential manipulation or other fraudulent activities.
Table of Comparisons
| Type of Trading Halt | Duration |
|---|---|
| Exchange-initiated | Up to 10 trading days |
| SEC-initiated | Indefinite |
Summary
A trading halt is a temporary suspension of trading in a security on a stock exchange. Trading halts are imposed by the exchange itself or by the Securities and Exchange Commission (SEC) in order to provide investors with time to better understand a security’s market activity. Trading halts are also used to prevent panic selling or to protect investors from potential manipulation. In recent years, trading halts have become more common due to the increased use of algorithmic trading and high-frequency trading. For more information, please visit the SEC’s website or the website of the exchange on which the security is traded.
See Also
- Circuit breaker
- Market maker
- Short selling
- Stock split
- Margin trading
- Day trading
- Options trading
- Swing trading
- Scalping
- Arbitrage
