A trading halt, is a temporary halt in the trading of a security. Usually, the halt is imposed for regulatory reasons, the anticipation of significant news, or to correct a situation in which there are excess of buy or sell orders for a specific security.
What is a Trading Halt?
A trading halt is a temporary suspension of a company’s trading activity that may occur at the request of the company or where the ASX receives an announcement from a related entity that is deemed to be market sensitive. The securities are placed into a ‘Trading Halt Session State‘ where market participants can place orders but are not able to trade the securities. Trading generally resumes at the earlier of:
- The time/date announced by the ASX when the trading halt will end
- The commencement of normal trading on the second trading day after the trading halt was imposed
- Once the listed entity makes an announcement
Advantages of Halting Trading
Undoubtedly, investors in a stock that is halted would get anxious. However, stock halts are actually used to protect investors and level the playing field between investors who are informed and reactive, and those who are simply not up to date on the news. The advantages of temporarily halting trading include:
- Allowing all market participants to be informed about any news
- Removing arbitrage opportunities and potential illegal transactions
- Giving other markets the opportunity to receive the news and halt trading of that stock on their own exchanges