Definition of Trading Halt
What is a "trading halt"? What is the definition of the term "trading halt"?
A trading halt is when a security or even an entire exchange is temporarily halted.
There are numerous reasons why a security or stock exchange could be halted.
A security may be halted because there is a news announcement forthcoming. For instance, XYZ may be announcing that they are going to be acquired by ABC, and their stock will be halted as this news disseminates.
The reason behind the halt? To give all investors ample opportunity to see and digest the news.
In the case of an entire stock exchange, an unusual surge in activity can trip "circuit breakers" which can cause an exchange to be halted.
For instance, in the case of the NYSE, the exchange will be halted for 1 hour if the exchange loses 10% of its value before 2 pm EST on any given day.
Again, this is done to give investors time to process incoming information and make informed decisions, rather than being forced to panic due to a quick downturn in the markets.
There are many different reasons why a security or exchange can be halted, but the underlying purpose behind the halt is the same - to give investors a chance to digest the news.
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