A trading halt is a temporary pause in the trading of a security, a group of securities or an entire market. It is imposed by a stock exchange or a regulator, sometimes at the request of the company concerned, and normally lasts from a few minutes to a few hours. During a halt, orders cannot be executed, although on many venues they can still be entered, amended or cancelled in preparation for the restart.
Halts exist for two broad reasons: to give all investors time to receive and assess important information before trading continues, and to interrupt price movements so rapid that they may reflect error or panic. They are one of the main tools for maintaining orderly markets, alongside price limits and market surveillance. A halt is shorter and more routine than a trading suspension, which may last days or longer and usually signals a regulatory concern.
Types of trading halt
- News pending. A company about to release information likely to move its share price, such as a takeover, a profit warning or a regulatory decision, asks its listing exchange to halt trading until the announcement has been published and circulated. The exchange may also act on its own initiative if it suspects information has leaked.
- Volatility halts. A security is paused automatically when its price moves beyond set limits within a short period. The mechanism is known in the United States as limit up-limit down and on many European venues as a volatility interruption.
- Market-wide halts. All trading in shares is paused when a benchmark index falls by a set percentage in a day. These are the best-known form of circuit breaker.
- Regulatory and compliance halts. An exchange stops trading in a company that has failed to meet listing obligations, for example by not filing accounts on time, or where there are doubts about the accuracy of public information.
- Operational halts. A venue stops trading because of a technical failure in its own systems or data feeds.
Rules in the United States
For individual shares, the limit up-limit down plan sets a price band around each security's recent average price. Orders cannot execute outside the band, and if quotes remain at the limit for fifteen seconds, trading in that security pauses for five minutes. The plan was introduced after the flash crash of May 2010, in which many shares briefly traded at absurd prices.
Market-wide circuit breakers are tied to the S&P 500 index. A fall of 7% from the previous close (Level 1) or 13% (Level 2) before 3:25 p.m. Eastern Time halts trading on all US equity markets for fifteen minutes; a fall of 20% (Level 3) at any time ends trading for the day. The Level 1 breaker was triggered four times in March 2020 at the start of the pandemic. The original mechanism was created after the stock market crash of October 1987.
A halt called by a share's primary listing exchange for pending news is honoured by every other venue trading that security. Separately, the Securities and Exchange Commission has statutory power to suspend trading in a security for up to ten business days where it believes the public lacks accurate information.
Practice in other markets
European exchanges rely mainly on security-level mechanisms. When an incoming order would trade outside a reference price range, continuous trading stops and the security enters a short auction, after which normal trading resumes. Under MiFID II, trading venues must have the ability to halt or constrain trading temporarily during significant price movements and must calibrate these controls to each instrument's liquidity. Several Asian markets combine halts with daily price limits, which cap how far a share may move in one session. Crypto asset exchanges, which trade continuously and have no single listing venue, generally have no coordinated halt; individual platforms may pause a market, but trading continues elsewhere.
How trading resumes
Most venues reopen a halted security through an auction similar to the opening auction. Orders are collected for a period without being matched, an indicative price is published, and a single price is then set at which the largest volume can trade. This concentrates liquidity and avoids a disorderly first print. Derivatives and exchange-traded funds linked to the halted security may be paused at the same time or may continue to trade with wider spreads, since market makers cannot hedge.
Effects and criticism
Supporters argue that halts protect investors from trading on incomplete information, give liquidity providers time to return and stop erroneous orders from cascading. Critics point to several costs. A halt removes liquidity exactly when some investors most need to trade, and it delays price discovery without changing the underlying news. Academic work has described a magnet effect, in which traders rush to sell as a price approaches a threshold for fear of being locked in, accelerating the move the rule was meant to slow. China's market-wide circuit breaker, introduced at the start of 2016, was withdrawn within days after it was triggered twice in its first week.
Halts also create operational work. Open orders may be cancelled or held, algorithmic trading controls must recognise the halted state, and index and fund valuations must use stale or estimated prices until trading resumes.